terex corporation
200 nyala farm road
Westport, ct 06880, usa
tel: +1 203-222-7170
www.terex.com
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AnnuAl RepoRt
2012
Leadership improvement performance resuLts
THE TEREX WAY DESCRIBES THE VALUES AND BELIEFS
THAT GUIDE OUR ACTIONS AND BEHAVIORS.
INTEGRITY
Integrity reflects honesty, ethics, transparency and accountability.
We are committed to maintaining high ethical standards in all of
our business dealings.
RESPECT
Respect incorporates concern for safety, health, teamwork, diversity,
inclusion and performance. We treat all our team members, customers
and suppliers with respect and dignity.
IMPROVEMENT
Improvement encompasses quality, problem-solving systems, a
continuous improvement culture and collaboration. We continuously
search for new and better ways of doing things, focusing on
continuous improvement and the elimination of waste.
SERVANT
LEADERSHIP
Servant leadership requires service to others, humility, authenticity
and leading by example. We work to serve the needs of our
customers, investors and team members.
COURAGE
Courage entails willingness to take risks, responsibility, action and
empowerment. We have the courage to make a difference even when
it is difficult.
CITIZENSHIP
Citizenship means social responsibility and environmental stewardship.
We comply with all laws and we respect all peoples’ values and
cultures and are good global, national and local citizens.
SHAREHOLDER INFORMATION
Transfer Agent And Registrar
American Stock Transfer & Trust Company
59 Maiden Lane, Plaza Level
New York, New York 10038
800-937-5449
718-921-8124
Shareholders seeking information concerning stock
transfers, change of addresses and lost certificates
should contact the Company’s stock transfer agent
directly. American Stock Transfer & Trust Company
may also be contacted at www.amstock.com.
Stock Information
Stock Symbol: TEX
Stock Exchange:
New York Stock Exchange
The high and low quarterly sales prices for the past
two years of Terex Corporation are as follows:
2012
Q1
Q2
Q3
Q4
HIGH
26.77
25.34
26.20
28.33
LOW
14.10
14.89
14.05
20.41
2011
Q1
Q2
Q3
Q4
HIGH
38.50
38.43
29.87
18.51
LOW
28.19
24.59
10.21
9.30
Annual Report / Form 10-K
Copies of the Annual Report / Form 10-K are available
from Terex corporate headquarters by calling Investor
Relations at +1 203-222-5942, or by visiting the
Investor Relations section of the Terex Corporation
website at www.terex.com.
Annual Meeting
The Annual Meeting of Shareholders will be held at
10:00 a.m. (Eastern Time) on Thursday, May 9, 2013
at Terex Corporation, 200 Nyala Farm Road, Westport,
Connecticut, USA.
For additional information about our Company and our
extensive line of products, please visit our website at
www.terex.com.
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This Annual Report contains forward-looking information based on current expectations of Terex. Because forward-looking statements involve risks and uncertainties, actual results could differ materially. For a more
detailed description of such risks and uncertainties, see the Terex Annual Report on Form 10-K, included with this Annual Report, under the headings “Risk Factors” and “Forward Looking Information.” The forward-looking
statements contained herein speak only as of the date of this Annual Report. Terex expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained in this Annual Report to
reflect any change in its expectations. This Annual Report refers to various non-GAAP (U.S. generally accepted accounting principles) financial measures. The non-GAAP measures may not be comparable to similarly titled
measures being disclosed by other companies. Terex believes that this information is useful to understanding its operating results and the ongoing performance of its underlying businesses. See the Investor Relations
section of Terex’s website www.terex.com for a complete reconciliation of such measures. The photographs, products and services included in this Annual Report may be trademarks, service marks or trade-names of Terex
Corporation and/or its subsidiaries in the USA and other countries and all rights are reserved. Terex is a Registered Trademark of Terex Corporation in the USA and many other countries. Copyright 2013 Terex Corporation.
We feel we have the right
products, in the right markets,
properly positioned to grow
both through market share
expansion and in line with
the category or geography.
DEAR FELLOW SHAREHOLDERS:
Ronald M. DeFeo
Chairman and Chief Executive Officer
Last year was a pivotal year of performance for our Company.
FINANCIAL PERFORMANCE
I thank you for your support. We strengthened our strategic
During 2012, we set out to improve our margins, generate
position, we improved the financial performance, and we
cash, and integrate Demag Cranes AG into our new Material
deepened the Management Team and Board of the Company.
Handling and Port Solutions segment. We made excellent
This past year was a year of solid execution and progress.
progress in each of these areas. The operating margin for
We have much opportunity to improve from here and we plan
the Company as adjusted more than doubled to 6.4%, we
on delivering excellent progress in the coming years.
generated free cash flow of approximately $554 million, and
STRATEGIC POSITION
we will exceed the annualized integration synergies target
Over the past several years we have repositioned Terex
of $35 million. We further identified critical adjustments to
as a Lifting and Material Handling Solutions Company.
this business to run it more efficiently and effectively in the
This important change is an intentional departure from our
coming months and years.
historic association as a more purely construction equipment
We improved our capital structure and de-levered the
company. It reflects the recent acquisition of Demag Cranes
Company in 2012. Overall leverage ratios improved from
AG and our recent divestitures. The vast majority of our
4.9 times debt/adjusted EBITDA to 2.3 times debt/adjusted
businesses are now leaders in their categories. However,
EBITDA. We retired our highest cost notes and issued new
the main source of improvement is expected to come from
long-term debt at rates well below our historic levels. The
our existing portfolio. For the most part, we feel we have the
vast majority of these new notes are with maturity dates
right products, in the right markets, properly positioned to
in 2020 and beyond.
grow both through market share expansion and in line with
the category or geography.
TEREX CORPORATION | Annual Report 2012
1
We believe that our existing portfolio
of businesses can result in revenue of
about $10 billion, an operating margin
of approximately 10%, or $1 billion of
operating profit, which in turn should
deliver $5.00 or greater in earnings
per share.
NET SALES AND OPERATING MARGIN
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$7.35
$6.50
$3.86
$4.42
2009
2010
2011
2012
% Operating Margin
12
8
4
0
-4
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-12
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We also established meaningful corporate goals to achieve
financial results of 2012. As you know, we have named
in 2015. We believe that our existing portfolio of businesses
Kevin Bradley Senior Vice President and Chief Financial
can result in revenue of about $10 billion, an operating margin
Officer. Kevin’s most recent assignment was President of our
of approximately 10%, or $1 billion of operating profit, which
Terex Cranes operation and prior to that President of Terex
in turn should deliver $5.00 or greater in earnings per share.
Financial Services. Kevin brings a strong commitment to
The net effect should be a return on invested capital in
compliance as well as operational experience and energy to
excess of 15% after tax. To achieve these targets, we must
this new assignment. I look forward to his partnership as we
continue on our path of profitable growth, cash generation,
focus on the improvements underway within the Company.
integration of our recently acquired businesses, and debt
Further management changes continue to help us broaden
reduction. We anticipate these will continue to be our areas
and deepen the experience of our executive team. Tim Ford
of emphasis as we manage Terex through these somewhat
was named President of Terex Cranes following nearly seven
uncertain financial times. Achievement of these goals is by
years successfully leading our Aerial Work Platforms team.
no means assured, but the management team believes that
Matt Fearon was named President of Aerial Work Platforms
our businesses are capable of equaling or exceeding these
moving from the general management position of North
performance goals over the next several years.
America into this new role. Matt has been at Genie and
MANAGEMENT TEAM AND BOARD OF DIRECTORS
Terex nearly 17 years in a broad spectrum of important
The Terex executive management team continues to mature
prior assignments. Lastly, we have named Steve Filipov
and develop. During 2012, it was announced that Phil
as President of Material Handling & Port Solutions. Steve
Widman would be retiring following the completion of the
was previously President of Terex Cranes and most recently
2
TEREX CORPORATION | Annual Report 2012
NET SALES BY SEGMENT 2012
NET SALES BY GEOGRAPHY 2012
Aerial Work
Platforms
28%
Materials Processing
9%
Construction
18%
Material Handling
& Port Solutions
25%
Cranes
20%
USA / Canada
36%
Western Europe
27%
Rest of the World
37%
President of Terex Developing Markets and Strategic
of our customers we have been able to improve their returns
Accounts. I look forward to continuing to work with each
on capital and productivity. Over time we expect to continue
of these experienced Terex leaders on the operational
to build our customer responsiveness, financial return, and
improvements possible within each of their businesses.
team member engagement. However, we still are a rather
We also added to our Board of Directors, Dr. Raimund
young company with high aspirations.
Klinkner. Dr. Klinkner is currently Managing Partner of IMX
I thank you for your continuing support and I look forward
Institute for Manufacturing Excellence GmbH. Prior to that,
to sharing future progress with you in the months and
Dr. Klinkner held chief executive roles at several German
years ahead.
companies and is a well-known lean and logistics expert in
Germany. We look forward to Dr. Klinkner’s guidance and
Sincerely,
governance on our Board of Directors.
SUMMARY
In summary, 2012 was a year of significant accomplishments
Ron DeFeo
Chairman and Chief Executive Officer
March 2013
for our Company. The financial performance is improving, our
strategic position is more focused, and our management team is
experienced and deeply committed to the Terex Way Values.
We believe that through our products, we can help improve
the lives of people around the world. We know that for many
TEREX CORPORATION | Annual Report 2012
3
TEREX CORPORATION AT-A-GLANCE
BUSINESS SEGMENTS
NET SALES AND OPERATING MARGIN
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TEREX CORPORATION | Annual Report 2012
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3.0
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1.5
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2.0
1.5
1.0
0.5
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2.0
1.5
1.0
0.5
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2.0
1.5
1.0
0.5
0
1.0
0.8
0.6
0.4
0.2
0
$2.10
$1.75
$1.08
$0.85
2009
2010
2011
2012
% Operating Margin
$1.51
$1.31
$1.08
$0.83
2009
2010
2011
2012
% Operating Margin
$1.74
$1.42
$1.54
$1.49
2009
2010
2011
2012
% Operating Margin
$1.84
$1.08
$0.15
$0.36
2009
2010
2011
2012
% Operating Margin
$0.68
$0.66
$0.53
$0.35
2009
2010
2011
2012
% Operating Margin
30
20
10
0
-10
-20
20
10
0
-10
-20
-30
20
15
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-5
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NET SALES BY PRODUCT
NET SALES BY GEOGRAPHY
Boom Lifts
52%
Compact
45%
Off-Highway
25%
All Terrain
& Rough
Terrain
64%
Industrial
Cranes
64%
Crushing
49%
Trailer Mounted and Other 8%
Telehandlers
10%
Scissor Lifts
14%
Utility Products
16%
Mixer Trucks
& Other 5%
Asphalt /Concrete
7%
Material Handling
18%
Towers
4%
Other Truck
Mounted
13%
Crawlers
19%
Port
Technology
36%
Trommels
12%
Screening
39%
USA / Canada
69%
Rest of the World 18%
Western Europe 13%
USA / Canada
23%
Western Europe
36%
Rest of
the World
41%
USA / Canada
28%
Rest of
the World
45%
USA / Canada
12%
Rest of
the World
46%
Western Europe
27%
Western Europe
42%
USA / Canada
33%
Western Europe
19%
Rest of
the World
48%
TEREX CORPORATION | Annual Report 2012
5
BOARD OF DIRECTORS
CORPORATE LEADERSHIP
CORPORATE INFORMATION
Terex Corporation
200 Nyala Farm Road
Westport, CT 06880, USA
Telephone: +1 203-222-7170
Fax: +1 203-222-7976
Website: www.terex.com
Ronald M. DeFeo
Chairman and Chief Executive Officer,
Terex Corporation
G. Chris Andersen
Partner, G.C. Andersen Partners, LLC
Paula H. J. Cholmondeley
Private Consultant – Strategic Planning
Donald DeFosset
Chairman, President and CEO (Retired),
Walter Industries, Inc.
Thomas J. Hansen
Vice Chairman (Retired), Illinois Tool Works, Inc.
Dr. Raimund Klinkner
Managing Partner, IMX Institute for Manufacturing
Excellence GmbH
David A. Sachs
Senior Partner, Ares Management LLC
Oren G. Shaffer
Vice Chairman and Chief Financial Officer (Retired),
Qwest Communications International, Inc.
Ronald M. DeFeo
Chairman and Chief Executive Officer
Phillip C. Widman
Senior Vice President and Chief Financial Officer
(Retired March 2013)
Kevin Bradley
Senior Vice President and Chief Financial Officer
(Effective March 2013)
Eric I Cohen
Senior Vice President, Secretary and
General Counsel
Kevin A. Barr
Senior Vice President, Human Resources
Brian J. Henry
Senior Vice President, Finance and
Business Development
George Ellis
President, Terex Construction
Matt Fearon
President, Terex Aerial Work Platforms
David C. Wang
President (Retired), Boeing (China) Co., Ltd.
Steve Filipov
President, Terex Material Handling & Port Solutions
Scott W. Wine
Chief Executive Officer, Polaris Industries Inc.
Timothy A. Ford
President, Terex Cranes
Dr. Donald P. Jacobs*
Dean Emeritus And Gaylord Freeman
Distinguished Professor of Banking,
The J. L. Kellogg Graduate School of Management
at Northwestern University
* Director Emeritus
Kieran Hegarty
President, Terex Materials Processing
Ramon Oliu
President, Terex Financial Services
Doug Friesen
Senior Vice President, Terex Business System
Ken Lousberg
President, Terex China
Mark Clair
Vice President, Controller and
Chief Accounting Officer
Stacey Babson-Smith
Vice President, Chief Ethics and
Compliance Officer
6
TEREX CORPORATION | Annual Report 2012
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2012
or
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)
200 Nyala Farm Road, Westport, Connecticut
(Address of principal executive offices)
34-1531521
(IRS Employer Identification No.)
06880
(Zip Code)
Registrant’s telephone number, including area code: (203) 222-7170
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
NEW YORK STOCK EXCHANGE
(Name of Exchange on which Registered)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES
NO
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act.
YES
NO
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.
YES
NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
YES
NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K.
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES
NO
The aggregate market value of the voting and non-voting common equity stock held by non-affiliates of the Registrant was approximately $1,899
million based on the last sale price on June 30, 2012.
THE NUMBER OF SHARES OF THE REGISTRANT’S COMMON STOCK OUTSTANDING WAS 110.7 MILLION AS OF
February 21, 2013.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Terex Corporation Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the year
covered by this Form 10-K with respect to the 2013 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.
As used in this Annual Report on Form 10-K, unless otherwise indicated, Terex Corporation, together with its consolidated
subsidiaries, is hereinafter referred to as “Terex,” the “Registrant,” “us,” “we,” “our” or the “Company.” This Annual Report
generally speaks as of December 31, 2012, unless specifically noted otherwise.
Forward-Looking Information
Certain information in this Annual Report includes forward-looking statements (within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding future events or our future financial performance
that involve certain contingencies and uncertainties, including those discussed below in the section entitled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Contingencies and Uncertainties.” In addition, when
included in this Annual Report or in documents incorporated herein by reference, the words “may,” “expects,” “should,” “intends,”
“anticipates,” “believes,” “plans,” “projects,” “estimates” and the negatives thereof and analogous or similar expressions are
intended to identify forward-looking statements. However, the absence of these words does not mean that the statement is not
forward-looking. We have based these forward-looking statements on current expectations and projections about future events.
These statements are not guarantees of future performance. Such statements are inherently subject to a variety of risks and
uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. Such
risks and uncertainties, many of which are beyond our control, include, among others:
our business is cyclical and weak general economic conditions affect the sales of our products and financial results;
our ability to successfully integrate acquired businesses, including Demag Cranes AG;
the need to comply with restrictive covenants contained in our debt agreements;
our ability to generate sufficient cash flow to service our debt obligations and operate our business;
our ability to access the capital markets to raise funds and provide liquidity;
our business is sensitive to government spending;
our business is very competitive and is affected by our cost structure, pricing, product initiatives and other actions
taken by competitors;
our ability to timely manufacture and deliver products to customers;
our retention of key management personnel;
the financial condition of suppliers and customers, and their continued access to capital;
our providing financing and credit support for some of our customers;
•
•
•
•
• we may experience losses in excess of recorded reserves;
•
•
•
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, regional economic conditions and
trade restrictions;
our operations are subject to a number of potential risks that arise from operating a multinational business, including
compliance with changing regulatory environments, the Foreign Corrupt Practices Act and other similar laws, and
political instability;
a material disruption to one of our significant facilities;
possible work stoppages and other labor matters;
compliance with changing laws and regulations, particularly environmental and tax laws and regulations;
litigation, product liability claims, patent claims, class action lawsuits and other liabilities;
our ability to comply with an injunction and related obligations resulting from the settlement of an investigation by the
United States Securities and Exchange Commission (“SEC”);
our implementation of a global enterprise system and its performance; and
other factors.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Actual events or our actual future results may differ materially from any forward-looking statement due to these and other risks,
uncertainties and significant factors. The forward-looking statements contained herein speak only as of the date of this Annual
Report and the forward-looking statements contained in documents incorporated herein by reference speak only as of the date of
the respective documents. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to
any forward-looking statement contained or incorporated by reference in this Annual Report to reflect any change in our expectations
with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
2
TEREX CORPORATION AND SUBSIDIARIES
Index to Annual Report on Form 10-K
For the Year Ended December 31, 2012
PART I
PAGE
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosure
PART II
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15.
Exhibits and Financial Statement Schedules
PART IV
4
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3
PART I
ITEM 1.
BUSINESS
GENERAL
Terex is a diversified global equipment manufacturer of specialized machinery products. We are focused on delivering reliable,
customer-driven solutions for a wide range of commercial applications, including the construction, infrastructure, quarrying,
mining, manufacturing, shipping, transportation, refining, energy and utility industries. We report in five business segments: (i)
Aerial Work Platforms; (ii) Construction; (iii) Cranes; (iv) Material Handling & Port Solutions; and (v) Materials Processing.
We view our purpose as making products that will be used to improve the lives of people around the world. Our mission is to
provide solutions to our machinery and industrial product customers that yield superior productivity and return on investment.
Our vision focuses on our commitments to our core constituencies of customers, stakeholders and team members by providing
our customers with a superior ownership experience, our stakeholders with a profitable enterprise that increases value, and our
team members with a preferred place to work.
Our Company was incorporated in Delaware in October 1986 as Terex U.S.A., Inc. We have changed significantly since that time,
achieving $7.3 billion of net sales in 2012. Much of our growth has been accomplished through acquisitions, and, in the past ten
years, we have also focused on becoming a superb operating company.
As we have expanded our operations, our business has become increasingly international in scope, with our products manufactured
in North and South America, Europe, Australia and Asia and sold worldwide. We continue to focus on expanding our business
globally, with an increased emphasis on developing markets such as China, India, Brazil, Russia and the Middle East.
For financial information about our industry and geographic segments, see “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and Note B – “Business Segment Information” in the Notes to the Consolidated Financial
Statements.
AERIAL WORK PLATFORMS
Our Aerial Work Platforms (“AWP”) segment designs, manufactures, refurbishes, services and markets aerial work platform
equipment, telehandlers, light towers, bridge inspection equipment and utility equipment. Products include portable material lifts,
portable aerial work platforms, trailer-mounted articulating booms, self-propelled articulating and telescopic booms, scissor lifts,
telehandlers, trailer-mounted light towers, bridge inspection equipment and utility equipment (including truck-mounted digger
derricks, auger drills, aerial devices and cable placers) as well as their related components and replacement parts. Customers use
these products to construct and maintain industrial, commercial and residential buildings and facilities, construct and maintain
utility and telecommunication lines, trim trees, in construction and foundation drilling applications and for other commercial
operations, as well as in a wide range of infrastructure projects. We market aerial work platform products principally under the
Terex® and Genie® brand names.
AWP has the following significant manufacturing operations:
• Aerial work platform equipment is manufactured in Redmond and Moses Lake, Washington, Umbertide, Italy, Coventry,
England and Changzhou, China;
• Telehandlers are manufactured in Moses Lake, Washington and Umbertide, Italy;
• Trailer-mounted light towers, trailer-mounted articulated booms and bridge inspection equipment are manufactured in
Rock Hill, South Carolina and Hosur, India; and
• Utility products are manufactured in Watertown and Huron, South Dakota, Betim, Brazil and Changzhou, China.
We have aerial work platform refurbishment facilities located in Waco, Texas and Stockton, California. Additionally, we operate
a network of service locations that service and support utility products, aerial devices, overhead cranes and a variety of other
Terex® products throughout North America.
We have a parts and logistics center located in North Bend, Washington for our aerial work platform equipment. Our utilities parts
business, along with a portion of our aerial work platform parts business, conduct business at a shared Terex facility in Southaven,
Mississippi. Our European parts and logistics operations are conducted through an out-sourced facility in Roosendaal, The
Netherlands.
4
CONSTRUCTION
Our Construction segment designs, manufactures and markets three primary categories of construction equipment and their related
components and replacement parts:
• Heavy construction equipment, including off-highway trucks and material handlers;
• Compact construction equipment, including loader backhoes, compaction equipment, mini and midi excavators, site
dumpers, compact track loaders, skid steer loaders, wheel loaders and tunneling equipment; and
• Roadbuilding equipment, including asphalt and concrete equipment (including pavers, transfer devices, plants, mixers,
reclaimers/stabilizers, placers and cold planers) and landfill compactors.
Customers use our products in construction and infrastructure projects, in building roads and bridges, in quarrying and mining
operations and for material handling applications. We market our Construction products principally under the Terex® brand name,
and for certain products, the Terex® name in conjunction with certain historic brand names.
Construction has the following significant manufacturing operations:
Heavy Construction Equipment
• Off-highway rigid haul trucks and articulated haul trucks are manufactured in Motherwell, Scotland; and
• Material handlers are manufactured in Bad Schönborn, Germany.
Compact Construction Equipment
• Compact track loaders and skid steer loaders are manufactured in Grand Rapids, Minnesota;
•
Site dumpers, compaction equipment and loader backhoes, as well as products for our AWP segment, are manufactured
in Coventry, England;
• A range of wheel loaders and mini, mobile, and midi excavators are manufactured in Crailsheim, Germany, and parts for
the above-referenced products are manufactured in Langenburg and Gerabronn, Germany. In addition, specialized
tunneling equipment is manufactured in Langenburg, Germany; and
• Loader backhoes and skid steer loaders are manufactured for markets in India and neighboring countries in Greater Noida,
Uttar Pradesh, India.
Roadbuilding Equipment
• Cold planers, reclaimers/stabilizers, asphalt plants, asphalt pavers, concrete plants, concrete pavers, concrete placers,
material transfer devices and landfill compactors are manufactured in Oklahoma City, Oklahoma;
• Asphalt plants, asphalt pavers, soil plants, cold planers and micropaving asphalt distributor equipment are manufactured
in Cachoeirinha, Brazil;
• Concrete pavers are manufactured in Canton, South Dakota; and
•
Front and rear discharge concrete mixer trucks are manufactured in Fort Wayne, Indiana
Construction’s North American distribution center is in Southaven, Mississippi and serves as a parts center for Construction and
other Terex operations.
We have a minority interest in a Chinese company which manufactures rigid haul trucks in China.
On February 11, 2013, we announced that we entered into a definitive agreement to divest our Roadbuilding operations in Brazil
and assets for our asphalt paver, reclaimer stabilizer and material transfer product lines which are currently manufactured in
Oklahoma City. The transaction is anticipated to close during the first quarter of 2013. We have also determined that we will be
exiting the remaining roadbuilding product lines that we manufacture in Oklahoma City.
CRANES
Our Cranes segment designs, manufactures, services and markets mobile telescopic cranes, tower cranes, lattice boom crawler
cranes, lattice boom truck cranes and truck-mounted cranes (boom trucks), as well as their related components and replacement
parts. Our Cranes products are used primarily for construction, repair and maintenance of commercial buildings, manufacturing
facilities and infrastructure projects. We market our Cranes products principally under the Terex® brand name.
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Cranes has the following significant manufacturing operations:
• Rough terrain and telescopic crawler cranes are manufactured in Crespellano, Italy;
• All-terrain cranes, truck cranes, truck-mounted cranes and self-erecting tower cranes are manufactured in Montceau-les-
Mines, France;
• Rough terrain cranes, truck cranes and truck-mounted cranes are manufactured in Waverly, Iowa;
• Rough terrain cranes are manufactured in Cachoeirinha, Brazil;
• Lattice boom crawler cranes are manufactured in Oklahoma City, Oklahoma and Jinan, China;
•
• Tower cranes are manufactured in Fontanafredda, Italy;
• Lattice boom crawler and lattice boom truck cranes, as well as all terrain cranes, are manufactured in Zweibruecken-
Pick and carry cranes are manufactured in Brisbane, Australia;
Dinglerstrasse and Zweibruecken-Wallerscheid, Germany; and
Steel assemblies for cranes are manufactured in Bierbach, Germany and Pecs, Hungary.
•
We have a minority interest in a Chinese company which manufactures truck cranes and truck-mounted cranes in China.
MATERIAL HANDLING & PORT SOLUTIONS
Our Material Handling & Port Solutions (“MHPS”) segment designs, manufactures, refurbishes, services and markets industrial
cranes, including standard 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, gantry
cranes, ship-to-shore 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 material handling at manufacturing and port and rail facilities.
Our MHPS segment also operates an extensive global sales and service network. We market our MHPS products under the Terex®
and Demag® brand names and the Terex® name in conjunction with the Gottwald® brand name.
MHPS has the following significant manufacturing operations:
•
•
Standard cranes are manufactured in Luisenthal, Germany, Banbury, UK, Madrid, Spain, Milan, Italy, Solon, Ohio, Cotia,
Brazil, Boksburg, South Africa, Chakan, India, Shanghai, China, and Sydney, Australia;
Process cranes are manufactured in Slany, Czech Republic, Boksburg, South Africa, Chakan, India, Shanghai, China,
Cotia, Brazil and Sydney, Australia;
• Rope and chain hoists are manufactured in Wetter an der Ruhr, Germany, Shanghai, China, Milan, Italy and Cotia, Brazil;
• Electric motors are manufactured in Uslar, Germany;
• Light crane systems are manufactured in Shanghai, China, Cotia, Brazil, Chakan, India and Wetter an der Ruhr, Germany;
• Mobile harbor cranes, automated stacking cranes and automated guided vehicles are manufactured in Düsseldorf,
Germany;
• Rubber tired gantry cranes, rail mounted gantry cranes, ship-to-shore cranes, reach stackers, empty container handlers,
general cargo lift trucks and other material handling equipment are manufactured in Xiamen, China;
• Reach stackers are manufactured in Montceau-les-Mines, France;
•
• Reach stackers, empty container handlers, full container handlers and general cargo lift trucks are manufactured in
Straddle and sprinter carriers are manufactured in Wurzburg, Germany; and
Lentigione, Italy.
We offer a range of services for cranes and lifting equipment and operate a global network of more than 220 service stations
worldwide.
MATERIALS PROCESSING
Our Materials Processing (“MP”) segment designs, manufactures and markets materials processing equipment, including crushers,
washing systems, screens, apron feeders, chippers and related components and replacement parts. Customers use our MP products
in construction, infrastructure and recycling projects, in various quarrying and mining applications, as well as in landscaping and
biomass production industries. We market our MP products principally under the Terex® and Powerscreen® brand names and the
Terex® name in conjunction with certain historic brand names.
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MP has the following significant manufacturing operations:
• Mobile crushers, mobile screens and washing systems are manufactured in Omagh and Dungannon, Northern Ireland;
• Mobile crushers and mobile screens are manufactured in Hosur, India, primarily for the Indian market;
• Base crushers and base screens are manufactured in Subang Jaya, Malaysia and at a Terex facility in Oklahoma City,
Oklahoma;
Screening equipment is manufactured in Durand, Michigan;
•
• Mobile crushers and mobile screens are manufactured in Quanzhou, China primarily for the Chinese market;
• Base crushers are manufactured in Coalville, England; and
• Hand-fed chippers and drum-style trailer-mounted and tracked biomass chippers are manufactured in Farwell, Michigan.
We have a North American distribution center in Louisville, Kentucky and service centers in Australia.
OTHER
We may assist customers in their rental, leasing and acquisition of our products through Terex Financial Services (“TFS”). TFS
uses its equipment financing experience to provide financing solutions to our customers who purchase our equipment. TFS provides
financing support primarily: (i) by facilitating loans and leases between our customers and third party financial institutions; (ii) in
the United States and on a limited basis in China, originating, underwriting, documenting, funding and servicing financing
transactions directly with end-user customers, distributors and rental companies; and (iii) in a few countries in Europe, purchasing
receivables associated with Terex equipment financings that were originated by third party financial institutions. Most of the
transactions are fixed and floating rate loans. However, TFS also provides sales-type leases, operating leases and rentals. TFS, in
the normal course of business, also sells loans and leases to financial institutions with which it has established relationships.
Although the on-book financing activities of TFS have primarily been limited to the United States, China and several countries
in Europe, TFS is continually evaluating the need and opportunity to provide this capability in other countries.
DISCONTINUED OPERATIONS
On February 19, 2010, we completed the disposition of our Mining business, formerly part of the Materials Processing & Mining
segment, to Bucyrus International, Inc. (“Bucyrus”) and received approximately $1 billion in cash and approximately 5.8 million
shares of Bucyrus common stock. The products divested in the transaction included hydraulic mining excavators, high capacity
surface mining trucks, track and rotary blasthole drills, drill tools and highwall mining equipment, as well as the related parts and
aftermarket service businesses, including Company-owned distribution locations. Our auger machines and auger tools product
lines were not sold as part of this disposition and instead are consolidated within our AWP segment.
In March 2010, we sold the assets of our Powertrain pumps business and gears business. The results of these businesses were
formerly consolidated within the Construction segment. On March 10, 2010, we entered into a definitive agreement to sell our
Atlas heavy construction equipment and knuckle-boom crane businesses. The results of these businesses were formerly consolidated
within the Construction and Cranes segments, respectively. On April 15, 2010, we completed the portion of this transaction related
to the operations in Germany and on August 11, 2010, we completed the portion of this transaction related to the operations in the
United Kingdom.
Due to the divestiture of these businesses, the reporting of these businesses has been included in discontinued operations for all
periods presented. See Note D – “Discontinued Operations” in the Notes to our Consolidated Financial Statements for more
information on our discontinued operations.
Subsequent Events
Subsequent to December 31, 2012, we realigned certain operations in an effort to strengthen our ability to service customers and
to recognize certain organizational efficiencies. Our Utilities business, formerly part of our AWP segment, will be consolidated
within our Cranes segment for financial reporting periods beginning on or after January 1, 2013. Our Crane America Services
business, formerly part of our MHPS segment, and our legacy AWP services business, formerly part of our AWP segment, will
both be consolidated within our Cranes segment for financial reporting periods beginning on or after January 1, 2013 and will be
run together as our North America Services business.
7
BUSINESS STRATEGY
General
We operate a diverse portfolio of specialized machinery businesses that serve numerous end-user applications and geographic
markets. Our diverse portfolio reduces the impact of any one application or market on business results while our focus on machinery-
related businesses brings common operational characteristics that enable business efficiency.
Mergers and acquisitions have played an important role in the history of our Company and we will continue to evaluate new
opportunities that can enhance our business portfolio while creating opportunities to leverage market presence, operational
capabilities, or both. However, our current focus is on operational improvement, not acquisitions, as the main driver of financial
performance.
Over the past several years, we have changed our business portfolio to better balance business drivers and strengthen the capabilities
of our Company. We have moved from what was predominantly a mining and construction equipment company to a more diverse
portfolio that serves numerous end markets. Sales to customers in the construction and mining industries, which comprised
approximately 80% of our revenue as recently as 2008, accounted for approximately 50% of our revenue in 2012. We have
transitioned ourselves to become a lifting and material handling solutions company.
Another principle of the Terex portfolio is category leadership, with the goal of achieving a top three position within the primary
markets that we serve. This goal shapes both acquisition and operating strategies in our company. As of 2012, approximately
75% of revenue was generated in areas where Terex is a top three competitor in the market served.
Our 2011 acquisition of Demag Cranes AG was a major step toward achieving these objectives. This acquisition enhanced our
existing port equipment business, added a new position in overhead cranes for the industrial environment, and brought a mature
set of service capabilities that we believe can be transformative within Terex. In 2012, we began to integrate Demag Cranes AG
into our Company and expect to make further progress in 2013.
We remain committed to increasing our presence in developing markets such as China, India, Brazil, Russia and the Middle East.
During 2011 and 2012, we strengthened our position in developing markets, acquiring a utility equipment and energized electrical
line work tools company in Brazil, as well as forming a joint venture that we believe will enhance our production and distribution
presence in Russia.
Our operating strategy reflects the following core elements of the Terex operating model:
1. Customer Responsiveness
2. Operational Efficiency
3. Global Growth
We must excel in each of these areas in order to be a more effective and more profitable company long term, and strong performance
in all three areas is central to the daily management of our Company.
Our Customer Responsiveness goal is to exceed the performance of competitors in providing equipment that goes to work and
stays at work, backed by world class parts and service support. Each of our businesses routinely measures customer satisfaction
and develops roadmaps used to drive both step-change and incremental improvement in customer satisfaction. Our goal is annual
improvement in our current businesses to achieve improved responsiveness versus our competition.
Our Operational Efficiency goal is to achieve the highest return on invested capital in our peer group. This implies an efficient
factory footprint, efficient supply and delivery chains, and a lean mindset that help eliminate waste throughout our processes for
production, delivery, and service to the customer using the Terex Business System (as explained below). It is not our goal to be
the lowest priced competitor, but to have the ability to compete on price when necessary. Competition in all of our businesses is
intense and we must position ourselves to compete more effectively during all phases of future business cycles.
Global Growth is critical to our future success. We believe that success in developing markets is both an opportunity and a necessity
for many of our businesses. Developing markets are also increasingly important supply bases in our industries. We have been
active for several years at sourcing components and products from developing markets and intend to pursue such opportunities
aggressively in the future.
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We remain committed to becoming a stronger and more effective company tomorrow than we are today. To succeed, we must
focus on what makes our individual businesses strong while also working together across our businesses to harness the strength
of the Company as a whole. We continue to strengthen our management team and processes in order to meet these goals.
What does not change however, is our unwavering commitment to a set of core principles that guide everything we do. These
principles are reflected in our purpose, mission, and vision, in a set of cultural characteristics that we call the Terex Way, and in
the processes and practices that define the Terex Business System.
Purpose, Mission, Vision
Our purpose remains to improve the lives of people around the world. Our mission is to provide solutions to our machinery and
industrial product customers that yield superior productivity and return on investment.
Our vision focuses on the Company’s core constituencies of customers, stakeholders and team members:
• Customers: We aim to be the most customer responsive company in the industry as determined by our customers.
•
Stakeholders: We aim to be the most profitable company in the industry as measured by return on invested capital.
• Team Members: We aim to be the best place to work in the industry as determined by our team members.
The Terex Way
We operate our business based on our value system, “The Terex Way.” The Terex Way shapes the culture of our Company and
reflects our collective commitment to what it means to be a part of Terex. The Terex Way is based on six key values:
•
Integrity: Integrity reflects honesty, ethics, transparency and accountability. We are committed to maintaining high ethical
standards in all of our business dealings and we never sacrifice our integrity for profit.
• Respect: Respect incorporates concern for safety, health, teamwork, diversity, inclusion and performance. We treat all
•
•
our team members, customers and suppliers with respect and dignity.
Improvement: Improvement encompasses quality, problem-solving systems, a continuous improvement culture and
collaboration. We continuously search for new and better ways of doing things, focusing on continuous improvement and
the elimination of waste.
Servant Leadership: Servant leadership requires service to others, humility, authenticity and leading by example. We work
to serve the needs of our customers, investors and team members.
• Courage: Courage entails willingness to take risks, responsibility, action and empowerment. We have the courage to make
a difference even when it is difficult.
• Citizenship: Citizenship means social responsibility and environmental stewardship. We comply with all laws and respect
all people’s values and cultures and are good global, national and local citizens.
The Terex Business System
Our operational principles are based on the “Terex Business System,” or “TBS.” TBS is the framework around which we build
our capabilities as a superb operating company to achieve our long-term goals. Founded on lean concepts, TBS is a set of guiding
principles and business processes that collectively define who we are and how we do what we do. TBS is our playbook to deliver
our customer, team member and financial goals. It aligns the Company globally with repeatable, teachable processes that harness
the full potential of our team members. TBS is not the business strategy; it supports the business strategy. We anticipate that TBS
will provide us a competitive advantage through the use of customer-centric tools that continually enhance customer responsiveness
and eliminate waste.
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PRODUCTS
AERIAL WORK PLATFORMS
AERIAL WORK PLATFORMS. Aerial work platform equipment safely positions workers and materials easily and quickly to
elevated work areas to enhance productivity. These products have developed as alternatives to scaffolding and ladders. We offer
a variety of aerial lifts that are categorized into seven product families: portable material lifts; portable aerial work platforms;
trailer-mounted articulating booms; self-propelled articulating and self-propelled telescopic booms; scissor lifts; and bridge
inspection equipment.
Portable material lifts are used primarily indoors in the construction, industrial and theatrical markets.
•
Portable aerial work platforms are used primarily indoors in a variety of markets to perform overhead maintenance.
•
• Trailer-mounted articulating booms are used both indoors and outdoors. They provide versatile reach, and have the ability
•
•
to be towed between job sites.
Self-propelled articulating booms are primarily used in construction and industrial applications, both indoors and outdoors.
They feature lifting versatility with up, out and over position capabilities to access difficult to reach overhead areas.
Self-propelled telescopic booms are used outdoors in commercial and industrial construction, as well as highway and
bridge maintenance projects.
•
Scissor lifts are used in outdoor and indoor applications in a variety of construction, industrial and commercial settings.
• Bridge inspection equipment allows access to many under bridge related tasks, including inspections, painting,
sandblasting, repairs, general maintenance, installation and maintenance of under bridge pipe and cables, stripping
operations and replacement and maintenance of bearings.
TELEHANDLERS. Telehandlers are used to move and place materials on residential and commercial construction sites and are
used in the energy, infrastructure and agricultural industries.
LIGHT TOWERS. Trailer-mounted light towers are used primarily to light work areas for night construction, entertainment,
emergency assistance, security and for other nighttime or low light applications.
UTILITY EQUIPMENT. Our utility products include digger derricks, auger drills, insulated and non-insulated aerial devices and
cable placers. These products are used by electric utilities, tree care companies, telecommunications and cable companies, and
the related construction industries, as well as by government organizations.
• Digger derricks are used to dig holes, hoist and set utility poles, as well as lift transformers and other materials at job
sites. Auger drills are used to dig holes for utility poles or construction foundations requiring larger diameter holes in
difficult soil conditions.
Insulated aerial devices are used to elevate workers and material to work areas at the top of utility poles, energized
transmission lines and for trimming trees near energized electrical lines, as well as for miscellaneous purposes such as
sign maintenance. Non-insulated aerials are used in applications where energized electrical lines are not a hazard.
•
• Cable placers are used to install fiber optic, copper and strand telephone and cable lines.
CONSTRUCTION
HEAVY CONSTRUCTION EQUIPMENT. We manufacture and/or market off-highway trucks and material handlers.
• Articulated off-highway trucks are three-axle, six-wheel drive machines with an articulating connection between the cab
and body that allows the cab and body to move independently, enabling all six tires to maintain ground contact for traction
on rough terrain.
• Rigid off-highway trucks are two-axle machines, which generally have larger capacities than articulated off-highway
trucks, but can operate only on improved or graded surfaces, and are used in large construction or infrastructure projects,
aggregates and smaller surface mines.
• Material handlers are designed for handling logs, scrap, recycling and other bulky materials with clamshell, magnet or
grapple attachments.
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COMPACT CONSTRUCTION EQUIPMENT. We manufacture a wide variety of compact construction equipment used primarily
in the construction and rental industries. Products include compact track loaders, loader backhoes, compaction equipment,
excavators, site dumpers, skid steer loaders, wheel loaders and tunneling equipment.
• Loader backhoes incorporate a front-end loader and rear excavator arm. They are used for loading, excavating and lifting
in many construction and agricultural related applications.
• Our compaction equipment ranges from pedestrian single drum to ride-on tandem rollers.
• Excavators in the compact equipment category include mini, mobile and midi excavators used in the general construction,
landscaping and rental businesses.
• Wheel loaders are used for loading and unloading materials. Applications include residential and non-residential
•
construction, waste management and general construction.
Site dumpers are used to move smaller quantities of materials from one location to another, and are primarily used for
construction applications.
• Compact track loaders and skid steer loaders are used for loading and unloading materials in construction, industrial,
rental, agricultural and landscaping businesses.
• Tunneling equipment, including loading machines, tunnel excavators, cutting units, customized tunneling and mining
machines, as well as modified standard construction machines, are used to provide a variety of tunneling solutions in
train, subway and metropolitan infrastructure projects.
ROADBUILDING EQUIPMENT. We manufacture asphalt pavers, transfer devices, asphalt plants, concrete production plants,
concrete mixers, concrete pavers, concrete placers, cold planers, reclaimers/stabilizers and landfill compactors.
• Asphalt pavers are available in a variety of sizes and designs. Smaller units are used for commercial work such as parking
lots, development streets and construction overlay projects. Mid-sized pavers are used for mainline and commercial
projects. High production pavers are engineered and built for heavy-duty, mainline paving.
• Asphalt transfer devices are available in both self-propelled and paver pushed designs and are intended to reduce
segregation in the paver to create a smoother roadway.
• Asphalt plants are used to produce hot mix asphalt and are available in portable, re-locatable and stationary configurations.
• Concrete production plants are used in residential, commercial, highway, airport and other markets. Our products include
a full range of portable and stationary transit mix and central mix production facilities.
• Concrete mixers are machines with a large revolving drum in which cement is mixed with other materials to make concrete.
We offer models mounted on trucks with three, four, five, six or seven axles and other front and rear discharge models.
• Our concrete pavers are used to finish bridges, concrete streets, highways and airport surfaces.
• Concrete placers transfer materials from trucks in preparation for paving.
• Cold planers mill and reclaim deteriorated asphalt pavement, leaving a level, textured surface upon which new paving
material is placed.
• Our reclaimers/stabilizers are used to add load-bearing strength to the base structures of new highways and new building
sites. They are also used for in-place reclaiming of deteriorated asphalt pavement.
• We produce landfill compactors used to compact refuse at landfill sites.
CRANES
We offer a wide variety of cranes, including mobile telescopic cranes, tower cranes, lattice boom crawler cranes, lattice boom
truck cranes and boom trucks.
MOBILE TELESCOPIC CRANES. Mobile telescopic cranes are used primarily for industrial applications, in commercial and
public works construction, and in maintenance applications to lift equipment or material. We offer a complete line of mobile
telescopic cranes, including rough terrain cranes, truck cranes, all terrain cranes and pick and carry cranes.
• Rough terrain cranes move materials and equipment on rough or uneven terrain, and are often located on a single
construction or work site such as a building site, a highway or a utility project for long periods. Rough terrain cranes
cannot be driven on highways and accordingly must be transported by truck to the work site.
• Truck cranes have two cabs and can travel rapidly from job site to job site at highway speeds. Truck cranes are often
used for multiple local jobs, primarily in urban or suburban areas.
• All-terrain cranes were developed in Europe as a cross between rough terrain and truck cranes, and are designed to travel
•
across both rough terrain and highways.
Pick and carry cranes are designed for a wide variety of applications, including use at mine sites, large fabrication yards,
building and construction sites and in machinery maintenance and installation. They combine high road speed with all
terrain capability.
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TOWER CRANES. Tower cranes are often used in urban areas where space is constrained and in long-term or very high building
sites. Tower cranes lift construction material and place the material at the point where it is being used. We produce the following
types of tower cranes:
•
Self-erecting tower cranes are trailer-mounted and unfold from four sections (two for the tower and two for the jib);
certain larger models have a telescopic tower and folding jib. These cranes can be assembled on site in a few hours.
Applications include residential and small commercial construction.
• Hammerhead tower cranes have a tower and a horizontal jib assembled from sections. The tower extends above the jib
to which suspension cables supporting the jib are attached. These cranes are assembled on-site in one to three days
depending on height, and can increase in height with the project.
Flat top tower cranes have a tower and a horizontal jib assembled from sections. There is no A-frame above the jib, which
is self-supporting and consists of reinforced jib sections. These cranes are assembled on-site in one to two days, and can
increase in height with the project.
•
• Luffing jib tower cranes have a tower and an angled jib assembled from sections. There is one A-frame above the jib to
which suspension cables supporting the jib are attached. Unlike other tower cranes, there is no trolley to control lateral
movement of the load, which is accomplished by changing the jib angle. These cranes are assembled on-site in two to
three days, and can increase in height with the project.
LATTICE BOOM CRAWLER AND LATTICE BOOM TRUCK CRANES. Lattice boom crawler and lattice boom truck cranes
are designed to lift material on rough terrain and can maneuver while bearing a load. The boom is made of tubular steel sections,
which, together with the base unit, are transported to and erected at a construction site. Applications include wind turbine erection.
TRUCK-MOUNTED CRANES (BOOM TRUCKS). We manufacture telescopic boom cranes and articulated hydraulic cranes
for mounting on a commercial truck chassis. Truck-mounted cranes are used primarily in the construction and maintenance
industries to lift equipment or materials to various heights. Boom trucks are generally lighter and have less lifting capacity than
truck cranes, and are used for many of the same applications when lower lifting capabilities are sufficient. An advantage of a
boom truck is that the equipment or material to be lifted by the crane can be transported by the truck, which can travel at highway
speeds. Applications include delivery of building materials and the installation of commercial air conditioners and other roof-
mounted equipment.
MATERIAL HANDLING & PORT SOLUTIONS
MATERIAL HANDLING. We manufacture standard cranes, process cranes and components, such as rope hoists, chain hoists,
light crane systems, travel units and electric motors.
•
•
Standard cranes are configured individually from standardized modules for industrial infrastructure applications.
Process cranes are also made from largely standardized modules and are integrated individually into the customer’s
specific production processes.
• Rope hoists and chain hoists are used to facilitate the movement of materials in a factory. They can either be integrated
as components in standard and process cranes or used as lifting devices in non-crane applications.
• Light crane systems can be described as railway systems on ceilings that use hoists to move and lift materials in factories.
• Wheel blocks, electric motors, gearboxes, converters and travel units are components that can be included in tailored
solutions for drive applications that aid in the movement of materials in a factory. These components can also be used
separately in non-crane applications.
• Crane sets comprise component packages for customers who are constructing their own girders in a factory.
PORT SOLUTIONS. We manufacture mobile harbor cranes, wide span gantry cranes, ship-to-shore gantry cranes, rubber tired
and rail mounted gantry cranes, straddle carriers, sprinter carriers, reach stackers, empty container handlers, full container handlers,
general cargo lift trucks, automated stacking cranes, automated guided vehicles and software solutions for logistic terminals.
• Mobile harbor cranes are used for material handling at ports, including general cargo handling, shipping containers and
bulk materials such as coal, iron ore and grain. Mobile harbor cranes can travel around the port as needed and have the
ability to move large loads. Mobile harbor cranes can be fitted with a variety of attachments for handling different types
of cargo.
Ship-to-shore gantry cranes are used to load and unload container vessels at ports.
•
• Rubber tired and rail mounted gantry cranes are used for space intensive shipping container stacking at port and railway
facilities.
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•
•
Straddle carriers pick up and carry shipping containers from or to a quay-side crane while straddling their load. Straddle
carriers have the capability to stack up to four shipping containers on top of each other. Straddle carriers are used in port
and railway facilities to move shipping containers and to load and unload shipping containers from on-highway trucks.
Straddle carriers have both horizontal and vertical lifting capabilities.
Sprinter carriers operate in a similar manner to straddle carriers, but operate at higher speeds and have only horizontal
lifting capabilities.
• Reach stackers are used to pick up and stack shipping containers at port and railway facilities. At the end of each reach
stacker’s boom is a spreader that enables it to attach to shipping containers of varying lengths and weights and to rotate
the container.
• Empty container handlers, full container handlers and general cargo lift trucks are small to medium-sized highly mobile
trucks for use with a variety of container handling applications at port and railway facilities and provide general cargo
lifting capabilities.
• Automated stacking cranes and wide span gantries are able to stack and manage container storage either automatically
or semi-automatically. They also form the link between quayside and landside equipment such as ship-to-shore cranes,
transport vehicles and trucks.
• Automated guided vehicles can carry containers of varying size. The vehicles are controlled and supplied with data and
orders by our proprietary designed software and transponders, i.e. electro-magnetic route markers embedded into the
ground of the terminal, which navigate and control the vehicles. In large container terminals involving container transport,
storage and transloading, automated guided vehicles work hand-in-hand with automated stacking cranes.
SERVICES. We offer a range of services for cranes and lifting equipment consisting of field services, refurbishment and spare
parts, as well as consultancy and training services regarding the use of our crane systems. Our services are provided on our own
products and also on third-party products and related equipment.
MATERIALS PROCESSING
Materials processing equipment is used in processing aggregate materials for roadbuilding applications and is also used in the
quarrying, mining, demolition, recycling, landscaping and biomass production industries. Our materials processing equipment
includes crushers, screens and feeders, washing systems as well as wood and biomass chippers.
We manufacture a range of track-mounted jaw, impactor (both horizontal and vertical shaft) and cone crushers, as well as base
crushers for integration within static plants.
•
Jaw crushers are used for crushing larger rock, primarily at the quarry face or on recycling duties. Applications include
hard rock, sand and gravel and recycled materials. Impactor crushers are used in quarries for primary and secondary
applications, as well as in recycling. Cone crushers are used in secondary and tertiary applications to reduce a number
of materials, including quarry rock and riverbed gravel.
• Horizontal shaft impactors are primary and secondary crushers. They are typically applied to reduce soft to medium hard
materials, as well as recycled materials. Vertical shaft impactors are secondary and tertiary crushers that reduce material
utilizing various rotor configurations and are highly adaptable to any application.
Our screening and feeder equipment includes:
• Heavy duty inclined screens and feeders, which are used in high tonnage applications and are available as either stationary
or heavy-duty mobile equipment. Inclined screens are used in all phases of plant design from handling quarried material
to fine screening.
• Dry screening, which is used to process materials such as sand, gravel, quarry rock, coal, construction and demolition
waste, soil, compost and wood chips.
• Apron feeders, which are generally situated at the primary end of the processing facility, and have a rugged design in
order to handle the impact of the material being fed from front-end loaders and excavators. The feeder moves material
to the crushing and screening equipment in a controlled fashion.
Washing system products include a completely mobile, single chassis washing plant incorporating separation, washing, dewatering
and stockpiling. We manufacture mobile and stationary screening rinsers, bucket-wheel dewaterers, scrubbing devices for
aggregate, a mobile cyclone for maximum retention of sand particles, silt extraction systems, stockpiling conveyors and a sand
screw system as an alternative to bucket-wheel dewaterers. We also manufacture washing screens, which are used to separate,
wash, scrub, dewater and stockpile sand and gravel.
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Biomass chippers are used by biomass producers, land developers and contractors to produce chips for energy or for the clearing
of large sites. Hand-fed chippers are used by landscapers, rental companies, utilities, arborists, and municipalities to cut tree limbs
or trunks into wood chips.
PRODUCT CATEGORY SALES
The following table lists our main product categories and their percentage of our total sales:
PRODUCT CATEGORY
Aerial Work Platforms
Mobile Telescopic & Truck Cranes
Materials Processing Equipment
Port Equipment *
Compact Construction Equipment
Heavy Construction Equipment
Material Handling *
Services *
Lattice Boom Crawler & Tower Cranes
Utility Equipment
Telehandlers & Light Construction Equipment
Roadbuilding Equipment
TOTAL
* Demag Cranes AG sales included from August 16, 2011, date of acquisition
BACKLOG
Our backlog as of December 31, 2012 and 2011 was as follows:
AWP
Construction
Cranes
MHPS
MP
Total
PERCENTAGE OF SALES
2012
2011
2010
20%
16
13
9
8
7
7
6
5
4
4
1
19%
15%
17
12
9
10
9
4
3
7
4
4
2
23
12
8
10
9
—
—
8
7
3
5
100%
100%
100%
December 31,
2012
2011
(in millions)
$
$
652.3
209.0
482.2
595.2
70.4
2,009.1
$
$
652.1
243.1
532.7
652.1
80.7
2,160.7
We define backlog as firm orders that are expected to be filled within one year, although there can be no assurance that all such
backlog orders will be filled within that time. Our backlog orders represent primarily new equipment orders. Parts orders are
generally filled on an as-ordered basis.
Our management views backlog as one of many indicators of the performance of our business. Because many variables can cause
changes in backlog, and these changes may or may not be of any significance, we consequently view backlog as an important, but
not necessarily determinative, indicator of future results. High backlog can indicate a high level of future sales; however, when
backlogs are high, this may also reflect a high level of production delays, which may result in future order cancellations from
disappointed customers. Small backlog may indicate a low level of future sales; however, they may also reflect a rapid ability to
fill orders that is appreciated by our customers.
Our overall backlog amounts at December 31, 2012 decreased $151.6 million from our backlog amounts at December 31, 2011,
due to lower demand in most segments while maintaining strong demand for AWP orders.
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Our AWP segment backlog was stable year over year. We experienced less volatility in North American order patterns for our
aerial work platform products. Overall, AWP customers continue to replace aged fleets to have sufficient product available to
meet current utilization rates and are exhibiting confidence in expected end user demand. Increased orders in Latin America were
generally offset by decreased orders in Australia as customers in 2011 placed more orders due to incentives for advanced orders
at that time. A slight decrease in demand for our utility products was generally offset by increased pricing in 2012.
Construction segment backlog at December 31, 2012 decreased approximately 14% from December 31, 2011. This decrease over
the prior year was primarily due to lower demand for compact construction equipment and the effect of a high backlog in 2011
due to long lead times for compact construction equipment.
The backlog at our Cranes segment decreased approximately 9% from December 31, 2011. This decrease over the prior year was
primarily due to the segment's focus on margins and from lower demand for all-terrain cranes in most European markets due to
macro-economic factors. This was largely offset by continued strong demand in North America for rough terrain and truck cranes.
Our MHPS segment backlog decreased approximately 9% from December 31, 2011. This decrease over the prior year was primarily
due to delayed orders for mobile harbor cranes, straddle carriers and industrial cranes as a result of economic uncertainty. These
decreases were partially offset by orders received in 2012 for automated port technology products.
Our MP segment backlog at December 31, 2012 decreased approximately 13% from December 31, 2011. This decrease over the
prior year was primarily due to softening demand in European markets where financing and demand are still challenging, causing
dealers to delay the replenishment of their historically low inventories. We also experienced lower market demand in India.
DISTRIBUTION
We distribute our products through a global network of dealers, rental companies, major accounts and direct sales to customers.
AERIAL WORK PLATFORMS
Our aerial work platform, telehandler and light tower products are distributed principally through a global network of rental
companies, independent dealers and, to a lesser extent, strategic accounts. We employ sales representatives who service these
channel partners from offices located throughout the world. We sell bridge inspection equipment primarily directly to customers.
We sell utility equipment to the utility and municipal markets through a direct sales effort in certain territories and through a
network of independent distributors in North America. Outside of North America, independent dealers sell our utility equipment
directly to customers.
CONSTRUCTION
We distribute heavy construction equipment and replacement parts primarily through a network of independent dealers and
distributors throughout the world. Our dealers are predominantly independent businesses, which generally serve the construction,
mining, forestry and/or scrap industries. Although these dealers may carry products from a variety of manufacturers, they generally
carry only one manufacturer’s “brand” of each particular type of product.
We distribute compact construction equipment primarily through a network of independent dealers and rental distributors throughout
the world. We distribute loader backhoes and skid steer loaders manufactured in India through a network of approximately 50
dealers located in India, Nepal and neighboring countries.
We sell asphalt pavers, transfer devices, reclaimers/stabilizers, cold planers, concrete pavers, concrete placers, concrete plants and
landfill compactors to end user customers principally through independent dealers and distributors and, to a lesser extent, on a
direct basis in areas where distributors are not established. We sell asphalt plants and concrete roller pavers primarily direct to
end user customers.
We sell concrete mixers primarily directly to customers and through distributors in certain regions of the United States.
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CRANES
We market our crane products globally, optimizing assorted channel marketing systems including a distribution network and a
direct sales force. We have direct sales, primarily to specialized crane rental companies, in certain crane markets such as Australia,
the United Kingdom, Germany, Spain, Belgium, Italy, France and Scandinavia to offer comprehensive service and support to
customers. Distribution via a dealer network is often utilized in other geographic areas, including the United States.
MATERIAL HANDLING & PORT SOLUTIONS
Our port equipment products are sold directly from our factory or our regional subsidiaries or indirectly via contractual partners
to port and terminal operators and serviced either by the central service organization based in Düsseldorf, by the regional service
organization or contractual partners. Our industrial crane products are also sold directly from our factory or our regional subsidiaries
or indirectly via contractual partners to our end market customers.
MATERIALS PROCESSING
We distribute our products through a global network of independent dealers, rental companies, major accounts and direct sales
to customers.
RESEARCH AND DEVELOPMENT
We maintain engineering staff primarily at our manufacturing locations to conduct research and development for site-specific
products. Our businesses also assess global trends to understand future needs of our customers and help us decide which technologies
to implement in future development projects. In addition, our engineering center in India supports our engineering teams worldwide
through new product design, existing product design improvement and development of products for local markets. Continually
monitoring our materials, manufacturing and engineering costs is essential to identify possible savings, then leverage those savings
to improve our competitiveness and our customers’ return on investment. Our engineering expenses are primarily incurred to
develop (i) additional applications and extensions of our existing product lines to meet customer needs and take advantage of
growth opportunities and (ii) customer responsive enhancements and continuous cost improvements of existing products.
Our engineering focus mirrors the business priorities of delivering customer responsive solutions, growing in developing markets,
complying with evolving regulatory standards in our global markets and applying our lean manufacturing principles by
standardizing products, rationalizing components and strategically aligning with select global suppliers. Our engineering teams
in China, India and Brazil represent our commitment to engineering products for developing markets. They take equipment
technology from the developed markets and translate it to appropriate technology for developing markets using the experience
and cultural understanding of engineering teams native to those markets.
Product change driven by regulations requiring Tier 4 emissions compliance in most of our diesel engine powered machinery was
an important part of our engineering priorities in 2011 and 2012 and will be a major emphasis of our product development programs
through 2015 as we move through the engine-horsepower dependent phase-in of Tier 4 regulations across our various diesel-engine
equipped products. We have also focused on producing more cost-effective, eco-friendly solutions with the development,
implementation and launch of battery-powered automated guided vehicles in our MHPS segment.
Costs incurred to develop new products or improve existing products of continuing operations increased slightly in 2011 and 2012
as compared to 2010 due to new product development, increased work associated with ramping up production and the addition of
the MHPS segment, and were $75.6 million, $73.7 million and $59.9 million in 2012, 2011 and 2010, respectively. We have
continued our commitment to appropriate levels of engineering spending, commensurate with our level of vertical integration, in
order to meet our customer needs, uphold competitive functionality of our products and maintain regulatory compliance in all the
markets that we serve.
MATERIALS
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 2012,
input cost increases in tires and certain purchased components were generally offset by reductions in steel prices and competitive
sourcing activities. We did incur some net material cost increases as a result of legislation (primarily Tier 4 emission standards)
and performance based changes in certain product areas, particularly engines.
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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.
COMPETITION
We face a competitive global manufacturing market for all of our products. We compete with other manufacturers based on many
factors, particularly price, performance and product reliability. We generally operate under a best value strategy, where we attempt
to offer our customers products that are designed to improve the customer’s return on invested capital. However, in some instances,
customers may prefer the pricing, performance or reliability aspects of a competitor’s product despite our product pricing or
performance. We do not have a single competitor across all business segments. The following table shows the primary competitors
for our products in the following categories:
BUSINESS SEGMENT
Aerial Work Platforms
PRODUCTS
Portable Material Lifts and Portable Aerial
Work Platforms
PRIMARY COMPETITORS
Oshkosh (JLG), Vestil, Sumner
Boom Lifts
Scissor Lifts
Telehandlers
Oshkosh (JLG), Haulotte, Linamar (Skyjack), Tanfield
(Snorkel) and Aichi
Oshkosh (JLG), Linamar (Skyjack), Haulotte, Manitou
and Tanfield (Snorkel)
Oshkosh (JLG, Skytrak, Caterpillar and Lull brands),
JCB, CNH, Merlo and Manitou (Gehl)
Trailer-mounted Light Towers
Allmand Bros., Magnum and Doosan
Bridge Inspection Equipment
Moog USA and Barin
Utility Equipment
Altec and Time Manufacturing (Versalift)
Construction
Articulated Off-highway Trucks & Rigid
Off-highway Trucks
Volvo, Caterpillar, Doosan, John Deere, Bell, Liebherr
and Komatsu
Material Handlers
Wheel Loaders
Loader Backhoes
Liebherr, Sennebogen, Linkbelt, Exodus and Caterpillar
Caterpillar, Volvo, Kubota, Kawasaki, John Deere,
Komatsu, Hitachi, CNH, Liebherr and Doosan
Caterpillar, CNH, JCB, Komatsu, Volvo and John Deere
Compaction Equipment
Caterpillar, Bomag, Amman, Dynapac and Hamm
Mini Excavators
Midi Excavators
Site Dumpers
Skid Steer Loaders
Compact Track Loaders
Doosan (Bobcat), Yanmar, Volvo, Takeuchi, IHI, CNH,
Caterpillar, John Deere, Neuson and Kubota
Komatsu, Hitachi, Volvo and Yanmar
Thwaites and AUSA
Doosan (Bobcat), Caterpillar, CNH, John Deere,
Takeuchi, Manitou (Gehl), Volvo and Kubota
Doosan (Bobcat), Caterpillar, CNH, John Deere,
Takeuchi, Volvo and Manitou (Gehl)
Tunneling Equipment
Caterpillar and Liebherr
Asphalt Pavers and Transfer Devices
Volvo (Blaw-Knox), Fayat (Bomag), Caterpillar, Wirtgen
(Ciber and Vogele), Atlas Copco (Dynapac), and Astec
(Roadtec)
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BUSINESS SEGMENT
PRODUCTS
Asphalt Plants
Cold Planers
Concrete Production Plants
Concrete Pavers
Concrete Placers
Concrete Mixers
Landfill Compactors
Reclaimers/Stabilizers
Cranes
Mobile Telescopic Cranes
Tower Cranes
Lattice Boom Crawler Cranes
PRIMARY COMPETITORS
Astec Industries, Gencor Corporation, All-Mix, Ciber
and ADM
Fayat (Bomag), Caterpillar, Atlas Copco (Dynapac),
Wirtgen and Astec Industries (Roadtec)
Con-E-Co, Astec Industries, Erie Strayer, Helco, Hagen
and Stephens
Gomaco, Wirtgen, Power Curbers and Guntert &
Zimmerman
Gomaco, Wirtgen and Guntert & Zimmerman
Oshkosh, London and Continental Manufacturing
Al-Jon, Fayat (Bomag) and Caterpillar
Caterpillar, Astec Industries (Roadtec), Wirtgen and
Fayat (Bomag)
Liebherr, Manitowoc (Grove), Tadano-Faun, Sumitomo
(Link-Belt), XCMG, Kato, Zoomlion and Sany
Liebherr, Manitowoc (Potain), Comansa, Zoomlion,
Sany, XCMG and Wolffkran
Manitowoc, Sumitomo (Link-Belt), Liebherr, Hitachi,
Kobelco, XCMG, Zoomlion, Fushun and Sany
Lattice Boom Truck Cranes
Liebherr
Truck-Mounted Cranes
Manitowoc (National Crane), Altec and Manitex
Material Handling & Port
Solutions
Industrial Cranes
Konecranes, Columbus McKinnon, ABUS, Kito, GH and
OMIS
Mobile Harbor Cranes and Automated Port
Technology
Liebherr, Konecranes, Cargotec, Zhenua Port Machinery
(ZPMC) and Künz
Reach Stackers
Cargotec (Kalmar), Hyster, Konecranes (SMV), Taylor,
Dalian, CVS Ferrari and Liebherr
Straddle Carriers
Cargotec (Kalmar), CVS Ferrari and Konecranes
Rubber Tired and Rail Mounted Gantry
Cranes
Zhenua Port Machinery (ZPMC), Liebherr, Konecranes,
Cargotec (Kalmar), Doosan, Hyundai and Mitsui
Engineering & Shipbuilding
Ship-to-Shore Gantry Cranes
Zhenua Port Machinery (ZPMC), Liebherr, Konecranes,
Cargotec (Kalmar), Samsung, Doosan, Hyundai and
Mitsui Engineering & Shipbuilding
Empty Container Handlers, Full Container
Handlers and General Cargo Lift Trucks
Cargotec (Kalmar), Hyster, Linde, CVS Ferrari,
Konecranes (SMV), Svetruck and Sany
Materials Processing
Crushing Equipment
Metso, Astec
Kleemann
Industries, Sandvik, Komatsu and
Screening Equipment
Metso, Astec Industries and Sandvik
Washing systems
McLanahan, Astec
GreyStone
Industries, CDE Global and
Chippers
Vermeer, Bandit and Morbark
MAJOR CUSTOMERS
None of our customers accounted for more than 10% of our consolidated sales in 2012. In 2012, our largest customer accounted
for less than 3% of our net sales and our top ten customers in the aggregate accounted for less than 14% of our net sales.
18
EMPLOYEES
As of December 31, 2012, we had approximately 21,300 employees, including approximately 5,900 employees in the U.S.
Approximately 6% of our employees in the U.S. are represented by labor unions. Outside of the U.S., we enter into employment
contracts and collective agreements in those countries in which such relationships are mandatory or customary. The provisions
of these agreements correspond in each case with the required or customary terms in the subject jurisdiction. We generally consider
our relations with our employees to be good.
PATENTS, LICENSES AND TRADEMARKS
We use proprietary materials such as patents, trademarks, trade secrets and trade names in our operations and take actions to protect
these rights.
We use several significant trademarks and trade names, most notably the Terex®, Genie®, Demag® and Powerscreen® trademarks.
The other trademarks and trade names that we use include registered trademarks of Terex Corporation or its subsidiaries. The
Demag® trademark is a registered trademark of Siemens AG which is licensed to certain Terex subsidiaries for certain products.
We have many patents that we use in connection with our operations, and most of our products contain some proprietary technology.
Many of these patents and related proprietary technology are important to the production of particular products; however, overall,
our patents, taken together, are not material to our business or our financial results, nor do they provide us with a competitive
advantage over our competitors.
We protect our proprietary rights through registration, agreements and litigation to the extent we deem appropriate. We own and
maintain trademark registrations and patents in countries where we conduct business, and monitor the status of our trademark
registrations and patents to maintain them in force and renew them as appropriate. The duration of active registrations varies based
upon the relevant statutes in the applicable jurisdiction. We also take further actions to protect our proprietary rights when
circumstances warrant, including the initiation of legal proceedings, if necessary.
Currently, we are engaged in various legal proceedings with respect to intellectual property rights. While the final outcome of
these matters cannot be predicted with certainty, we believe the outcome of such matters will not have a material adverse effect,
individually or in the aggregate, on our business or operating performance. For more detail, see “Item 3 – Legal Proceedings.”
SAFETY AND ENVIRONMENTAL CONSIDERATIONS
As part of The Terex Way, we are committed to providing a safe and healthy environment for our team members, and strive to
provide quality products that are safe to use and operate in an environmentally conscious and respectful manner.
We generate hazardous and non-hazardous wastes in the normal course of our manufacturing operations. As a result, we are subject
to a wide range of environmental laws and regulations. All of our employees are required to obey all applicable health, safety and
environmental laws and regulations and must observe the proper safety rules and environmental practices in work situations. These
laws and regulations govern actions that may have adverse environmental effects, such as discharges to air and water, and require
compliance with certain practices when handling and disposing of hazardous and non-hazardous wastes. These laws and regulations
would also impose liability for the costs of, and damages resulting from, cleaning up sites, past spills, disposals and other releases
of hazardous substances, should any of such events occur. We are committed to complying with these standards and monitoring
our workplaces to determine if equipment, machinery and facilities meet specified safety standards. Each of our facilities is subject
to an environmental audit at least once every three years to monitor compliance and no incidents have occurred which required
us to pay material amounts to comply with such laws and regulations. We are dedicated to seeing that safety and health hazards
are adequately addressed through appropriate work practices, training and procedures. For example, we have reduced lost time
injuries in the workplace since 2007 and we continue to work toward a world-class level of safety practices in our industry.
19
We are dedicated to product safety when designing and manufacturing our equipment. Our equipment is designed to meet all
applicable laws, regulations and industry standards for use in their markets. We continually incorporate safety improvements in
our products. We maintain an internal product safety team that is dedicated to improving safety and investigating and resolving
any product safety issues that may arise.
The use and operation of our equipment in an environmentally conscious manner is an important priority for Terex. We are aware
of global discussions regarding climate change and the impact of greenhouse gas emissions on global warming. We are increasing
our production of products that have lower greenhouse gas emissions in response to both regulatory initiatives and anticipated
market demand trends. For example, starting in 2010, one of our most significant design priorities was to include Tier 4 emission
compliant diesel engines in our machinery. This continued to be a priority in 2012 and will be a major emphasis of our product
development programs through 2015 as we move through the engine-horsepower dependent phase-in of Tier 4 regulations across
our diesel-engine equipped products. We manufacture a utility truck that uses plug-in electric hybrid technology to save fuel,
reduce emissions and reduce noise in residential areas. Similarly, our MHPS segment offers hybrid drive diesel-hydraulic and
diesel-electric systems on certain of its port equipment products.
Increasing laws and regulations dealing with the environmental aspects of the products we manufacture can result in significant
expenditures in designing and manufacturing new forms of equipment that satisfy such new laws and regulations. Compliance
with laws and regulations regarding safety and the environment has required, and will continue to require, us to make expenditures.
We currently do not expect that these expenditures will have a material adverse effect on our business or results of operations.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, GEOGRAPHIC AREAS AND EXPORT SALES
Information regarding foreign and domestic operations, export sales and segment information is included in Note B – “Business
Segment Information” in the Notes to the Consolidated Financial Statements.
SEASONAL FACTORS
Over the past several years, our business has become less seasonal. As we have grown, diversified our product offerings and
expanded the geographic reach of our products, our sales have become less dependent on construction products and sales in the
United States and Europe. As we enter 2013, we expect the overall economic environment will be more of a factor on our sales
than historical seasonal trends.
WORKING CAPITAL
Our businesses are working capital intensive and require funding to purchase production and replacement parts inventories, capital
expenditures to repair, replace and upgrade existing facilities, as well as finance receivables from customers and dealers. We have
debt service requirements, including semi-annual interest payments on our outstanding notes and quarterly interest payments on
our bank credit facility. We believe cash generated from operations, together with availability under our bank credit facility and
cash on hand, provide us with adequate liquidity to meet our operating and debt service requirements. See Item 1A “Risk Factors”
for a detailed description of the risks resulting from our debt and our ability to generate sufficient cash flow to operate our business.
We will continue to pursue cash generation opportunities, including reducing costs and working capital, reviewing alternatives for
under-utilized assets, and selectively investing in our businesses to promote growth opportunities.
AVAILABLE INFORMATION
We maintain a website at www.terex.com. We make available on our website under “About Terex” – “Investor Relations” – “SEC
Filings,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports as soon as reasonably practicable after we electronically file or furnish such material with the SEC.
In addition, we make available on our website under “About Terex” – “Investor Relations” – “Corporate Governance,” free of
charge, our Audit Committee Charter, Compensation Committee Charter, Corporate Responsibility and Strategy Committee
Charter, Governance and Nominating Committee Charter, Corporate Governance Guidelines and Code of Ethics and Conduct. In
addition, the foregoing information is available in print, without charge, to any stockholder who requests these materials from us.
20
OTHER INFORMATION
Iran Related Activities
Effective April 30, 2010, we adopted an internal policy prohibiting any transactions where Terex knows or has reason to believe
that such equipment or parts would be destined for Iran unless for humanitarian purposes. This policy applies to both U.S. and
non-U.S. subsidiaries and joint ventures controlled by Terex even if the transaction otherwise would be permissible under U.S.
law. In the very limited circumstances where existing contractual obligations of non-U.S. subsidiaries and controlled joint ventures
required the supply of equipment, parts or aftermarket service to entities in Iran, obligations under these contracts were to be
completed as quickly as possible provided that the transactions were compliant with U.S. law (“Winding Down Transactions”).
Subsequently on March 26, 2011, we revised our policy and eliminated the ability to engage in any Winding Down Transactions.
We acquired a majority interest in Demag Cranes AG on August 16, 2011, but did not obtain management control over Demag
Cranes AG and its subsidiaries until April 18, 2012. Once we obtained management control, Demag Cranes AG and its subsidiaries
subsequently adopted the Company’s internal policy on sales into Iran effective June 4, 2012. However, between January 1, 2012
and June 4, 2012, certain subsidiaries of Demag Cranes AG exported certain products into Iran.
Pursuant to Section 13(r) of the Securities Exchange Act of 1934, we are required to provide disclosure if, during 2012, we or any
of our affiliates have engaged in transactions or dealings with the government of Iran that have not been specifically authorized
by a U.S. federal department or agency.
During the year ended December 31, 2012 (and prior to the June 4, 2012 implementation of the Terex policy at Demag Cranes
AG and its subsidiaries), Demag Cranes and Component GmbH (“DCC”), a German subsidiary of Demag Cranes AG, exported
from Germany overhead crane components and spare parts to three entities in Iran, National Iranian Copper Industries Co.
(“NICIC”), Hormozgan Steel Complex (“HSC”) and Farabi Industrial & Agricultural Co. (“FIA”), which, based on information
available to us, we believe are or may be owned or controlled by the Government of Iran. All of the transactions occurred prior
to the October 9, 2012 date of the Presidential Executive Order that made it a violation of U.S. law for owned or controlled foreign
subsidiaries to knowingly engage in transactions with the Government of Iran or any person subject to the jurisdiction of the
Government of Iran and prior to August 10, 2012, the date of enactment of the Iran Threat Reduction and Syria Human Rights
Act of 2012.
The decision to provide the overhead crane components and spare parts was made and performed by a foreign entity and were
permissible under applicable law when they were executed. The gross revenue values for DCC for the transactions with NICIC,
HSC and FIA were €1,772, €5,932 and €18,174, respectively and the profit values for DCC for the transactions with NICIC, HSC
and FIA were €755,
€3,087 and €1 1,989, respectively. The last transaction generating revenue occurred on February 23, 2012,
although DCC supplied warranty parts on April 18, 2012 for which they were not paid.
As a result of our policy against any sales into Iran unless for humanitarian purposes, neither Terex nor any of its foreign subsidiaries
intend to conduct any future transactions into Iran.
21
ITEM 1A.
RISK FACTORS
You should carefully consider the following risks, together with the cautionary statement under the caption “Forward-Looking
Information” above and the other information included in this report. The risks described below are not the only ones we face.
Additional risks that are currently unknown to us or that we currently consider immaterial may also impair our business or adversely
affect our financial condition or results of operations. If any of the following risks actually occurs, our business, financial condition
or results of operation could be adversely affected.
Our business is affected by the cyclical nature of the markets we serve.
Demand for our products tends to be cyclical and is impacted by the general strength of the economies in which we sell our
products, prevailing interest rates, residential and non-residential construction spending, the capital expenditure allocations of our
customers and other factors. While demand in many of our end markets has rebounded from historical lows that we experienced
in 2009, such demand depends on the global economy and may not be sustainable. The global economy has continued to experience
uneven recovery and significant financial uncertainty. We cannot provide any assurance that the global economic weakness of
the past several years will not continue or become more severe. Recently, there have been increasing concerns about several
European economies. Further, certain countries in Asia and Latin America have experienced slower growth rates than the prior
year and there have been mixed economic signs in the U.S. If the global economy weakens it may cause customers to continue
to forego or postpone new purchases in favor of reducing their existing fleets or refurbishing or repairing existing machinery.
Concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations, the
overall stability of the euro and the suitability of the euro as a single currency given the diverse economic and political circumstances
in individual Eurozone countries. Concerns over the effect of this uncertainty on financial institutions globally, and national debt
and fiscal concerns in various regions, could have an adverse impact on the capital markets generally, and more specifically on
our ability and our customers, suppliers and lenders to finance their respective businesses, to access liquidity at acceptable financing
costs, if at all, on the availability of supplies and materials and on the demand for our products.
Our sales depend in part upon our customers’ replacement or repair cycles. If our customers are not successful in generating
sufficient revenue or are precluded from securing financing, they may not be able to pay, or may delay payment of, accounts
receivable that are owed to us. If the global economic weakness of the past several years continues or becomes more severe, or
if any economic recovery progresses more slowly than our or market expectations, then there could be an adverse effect on our
net sales, financial condition, profitability and/or cash flow and could result in the need for us to record inventory impairments.
We may face limitations on our ability to integrate acquired businesses, including Demag Cranes AG.
From time to time, we engage in strategic transactions involving risks, including the possible failure to successfully integrate and
realize the expected benefits of such transactions. We have consummated many acquisitions in the past and anticipate making
additional acquisitions in the future. In the second half of 2011, we acquired approximately 81% of the outstanding shares of
Demag Cranes AG, bringing our ownership total to approximately 82%. Our ability to realize the anticipated benefits of the
purchase, including the expected combination benefits, will depend, to a large extent, on our ability to integrate the businesses of
both companies. We were unable to begin any meaningful integration of the companies until a Domination and Profit and Loss
Transfer Agreement was put in place, which did not happen until April 2012.
The integration is now underway and management is devoting significant attention and resources to the integration process, which
may disrupt our business and, if implemented ineffectively, could preclude realization of the full benefits we expect. The risks
associated with the Demag Cranes AG acquisition and our other past or future acquisitions include:
the business culture of the acquired business may not match well with our culture;
technological and product synergies, economies of scale and cost reductions may not occur as expected;
•
•
• we may acquire or assume unexpected liabilities;
•
•
• we may fail to retain, motivate and integrate key management and other employees of the acquired business;
•
faulty assumptions may be made regarding the integration process;
unforeseen difficulties may arise in integrating operations and systems;
higher than expected finance costs may arise due to unforeseen changes in tax, trade, environmental, labor, safety,
payroll or pension policies in any jurisdiction in which the acquired business conducts its operations; and
• we may experience problems in retaining customers.
22
The successful integration of any previously acquired or newly acquired business also requires us to implement effective internal
control processes in these acquired businesses. While we believe we have successfully integrated acquisitions to date, we cannot
ensure that previously acquired or newly acquired companies will operate profitably, that the intended beneficial effect from these
acquisitions will be realized and that we will not encounter difficulties in implementing effective internal control processes in
these acquired businesses, particularly when the acquired business operates in foreign jurisdictions and/or was privately owned.
See the risk factor entitled “We must comply with an injunction and related obligations resulting from the settlement of an SEC
investigation” for additional consequences if we were to commit a violation of the reporting and internal control provisions of the
federal securities laws. In addition, to the extent that we are seeking acquisitions in machinery and industrial businesses that are
significantly different from our existing operations, there will be added risks and challenges for managing and integrating these
businesses. Further, we may need to consolidate or restructure our acquired or existing facilities, which may require expenditures
related to reductions in workforce and other charges resulting from these consolidations or restructuring activities, such as the
write-down of inventory and lease termination costs. Any of the foregoing could adversely affect our business and results of
operations.
Many of these factors will be outside of the combined company’s control and any one of them could result in increased costs,
decreases in the amount of expected revenues and diversion of management’s time and energy. If we fail to implement our
acquisition strategy, including successfully integrating acquired businesses, this could have an adverse effect on our business,
financial condition and results of operations.
We have a significant amount of debt outstanding and must comply with restrictive covenants in our debt agreements.
Our total long-term debt at December 31, 2012 was $2,098.7 million. Our credit agreement, and other debt agreements, contain
financial and restrictive covenants that may limit our ability to, among other things, borrow additional funds or take advantage of
business opportunities. While we are currently in compliance with the financial covenants, increases in our debt or decreases in
our earnings could cause us to fail to comply with these financial covenants. Failing to comply with such covenants could result
in an event of default that, if not cured or waived, could result in the acceleration of all our indebtedness or otherwise have a
material adverse effect on our financial position, results of operation and debt service capability.
Our level of debt and the financial and restrictive covenants contained in our credit agreement could have important consequences
on our financial position and results of operations, including increasing our vulnerability to increases in interest rates because debt
under our credit agreement bears interest at variable rates.
We may be unable to generate sufficient cash flow to service our debt obligations.
Servicing our debt requires a significant amount of cash. Our ability to generate sufficient cash depends on numerous factors
beyond our control and our business may not generate sufficient cash flow from operating activities. Our ability to make payments
on, and refinance, our debt and fund planned capital expenditures will depend on our ability to generate cash in the future. To
some extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond
our control. Lower sales, or uncollectible receivables, generally will reduce our cash flow.
We cannot assure that our business will generate sufficient cash flow from operations, or that future borrowings will be available
to us under our credit facility or otherwise, in an amount sufficient to fund our liquidity needs.
If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital
expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not
be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our
debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt
could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our
business operations.
Our access to capital markets and borrowing capacity could be limited in certain circumstances.
Our access to capital markets to raise funds through the sale of equity or debt securities is subject to various factors, including
general economic and/or financial market conditions. Significant changes in market liquidity conditions could impact access to
funding and associated funding costs, which could reduce our earnings and cash flows. If our consolidated cash flow coverage
ratio is less than 2.0 to 1.0, we are subject to significant restrictions on the amount of indebtedness that we can incur. Although
our cash flow coverage ratio was greater than 2.0 to 1.0 at the end of 2012, there can be no assurance that this will continue to
occur.
23
Our access to debt financing at competitive risk-based interest rates is partly a function of our credit ratings. A downgrade to our
credit ratings could increase our interest rates, could limit our access to public debt markets, could limit the institutions willing to
provide us credit facilities, and could make any future credit facilities or credit facility amendments more costly and/or difficult
to obtain.
In addition, in the past several years a number of large financial institutions have either failed or relied on the assistance of
governments to continue to operate as a going concern. Although we believe that the banks participating in our credit facility
have adequate capital and resources, we can provide no assurance that all of these banks will continue to operate as a going concern
in the future. If any of the banks in our lending group were to fail or be unwilling to renew our credit facility at or prior to its
expiration, it is possible that the borrowing capacity under our current or any future credit facility would be reduced. If the
availability under our credit facility was reduced significantly, we could be required to obtain capital from alternate sources to
finance our capital needs. Our options for addressing such capital constraints would include, but not be limited to (i) obtaining
commitments from the remaining banks in the lending group or from new banks to fund increased amounts under the terms of
our credit facility, or (ii) accessing the public capital markets. If it becomes necessary to access additional capital, it is possible
that any such alternatives in the current market could be on terms less favorable than under our existing credit facility terms, which
could have a negative impact on our consolidated financial position, results of operations or cash flows.
Our business is sensitive to government spending.
Many of our customers depend substantially on government funding of highway construction, maintenance and other infrastructure
projects. In addition, we sell products to governments and government agencies in the U.S. and other nations. Policies of
governments attempting to address local deficit or structural economic issues could have a material impact on our customers and
markets. Any decrease or delay in government funding of highway construction and maintenance, other infrastructure projects
and overall government spending could cause our revenues and profits to decrease.
We operate in a highly competitive industry.
Our industry is highly competitive. To compete successfully, our products must excel in terms of quality, reliability, productivity,
price, features, ease of use, safety and comfort, and we must also provide excellent customer service. The greater financial resources
of certain of our competitors may put us at a competitive disadvantage. Low-cost competition from China and other developing
markets could also result in decreased demand for our products. If competition in our industry intensifies or if our current
competitors lower their prices for competing products, we may lose sales or be required to lower the prices we charge for our
products. If we are unable to provide continued technological improvements in our equipment that meet our customers’
expectations, or the industry’s expectations, the demand for our equipment could be substantially adversely affected. Our ability
to match new product offerings to diverse global customers’ anticipated preferences for different types and sizes of equipment
and various equipment features and functionality, at affordable prices, is critical to our success. This requires a thorough
understanding of our existing and potential customers on a global basis, particularly in potential high growth markets, including
Brazil, China and India. Failure to compete effectively with our competitors could result in lower revenues from our products
and services, lower gross margins or cause us to lose market share.
We rely on key management.
We rely on the management and leadership skills of our senior management team, particularly Ronald M. DeFeo, our Chairman
of the Board and Chief Executive Officer. Mr. DeFeo has been with us since 1992, serving as Chief Executive Officer since 1995
and Chairman since 1998, guiding the transformation of Terex during that time. We have an employment agreement with Mr.
DeFeo, which expires on December 31, 2015. We could be harmed by the loss of any of our senior executives or other key
personnel in the future.
Some of our customers rely on financing with third parties to purchase our products.
We rely on sales of our products to generate cash from operations. Significant portions of our sales are financed by third party
finance companies on behalf of our customers. The availability of financing by third parties is affected by general economic
conditions, the credit worthiness of our customers and the estimated residual value of our equipment. Deterioration in the credit
quality of our customers or the estimated residual value of our equipment could negatively impact the ability of our customers to
obtain the resources they need to purchase our equipment. Given the current economic conditions, there can be no assurance that
third party finance companies will continue to extend credit to our customers.
24
Due to the ongoing uncertainty in certain global economies, some of our customers have been unable to obtain the credit they
need to buy our equipment. As a result, some of our customers may need to cancel existing orders. Given the lack of liquidity,
our customers may be compelled to sell their equipment at less than fair value to raise cash, which could have a negative impact
on residual values of our equipment. These economic conditions could have a material adverse effect on demand for our products
and on our financial condition and operating results.
We provide financing and credit support for some of our customers.
We assist customers in their rental, leasing and acquisition of our products through TFS. We provide financing for some of our
customers, primarily in the U.S., to acquire and use our equipment through loans, sales-type leases, and operating leases. TFS
enters into these financing agreements with the intent either to hold the financing until maturity or to sell the financing to a third
party within a short time period. Until such financing obligations are satisfied through either customer payments or a third party
sale, we retain the risks associated with such customer financing. Our results could be adversely affected if such customers default
on their contractual obligations to us or if the residual values of such equipment on these transactions decline below the original
estimated values.
As described above, our customers, from time to time, may fund the acquisition of our equipment through third-party finance
companies. In certain instances, we may provide credit guarantees, residual value guarantees or buyback guarantees. With these
guarantees we must assess the probability of losses or non-performance in ways similar to the evaluation of accounts receivable,
including consideration of a customer’s payment history, leverage, availability of third party financing, political and exchange
risks, and other factors. Many of these factors, including the assessment of a customer’s ability to pay, are influenced by economic
and market factors that cannot be predicted with certainty. In circumstances where we believe it is probable that a specific customer
will have difficulty meeting its financial obligations, a specific reserve is recorded to recognize a liability for a guarantee we expect
to pay, taking into account any amounts that we would anticipate realizing if we are forced to repossess the equipment that supports
the customer’s financial obligations to us. During periods of economic weakness, the collateral underlying our guarantees of
indebtedness of customers or receivables can decline sharply, thereby increasing our exposure to losses. In the future, we may
incur losses in excess of our recorded reserves if the financial condition of our customers were to deteriorate further or the full
amount of any anticipated proceeds from the sale of the collateral supporting our customers’ financial obligations is not realized.
To date, losses related to guarantees have been negligible, however there can be no assurance that our historical experience with
respect to guarantees will be indicative of future results.
We may experience losses in excess of our recorded reserves for trade receivables.
As of December 31, 2012, we had trade receivables of $1,077.7 million. We evaluate the collectability of open accounts, finance
receivables and note receivables based on a combination of factors and establish reserves based on our estimates of probable
losses. In circumstances where we believe it is probable that a specific customer will have difficulty meeting its financial obligations,
a specific reserve is recorded to reduce the net recognized receivable to the amount we expect to collect. We also establish additional
reserves based upon our perception of the quality of the current receivables, the current financial position of our customers and
past collections experience. Continued economic uncertainty could result in additional requirements for specific reserves, which
could have a negative impact on our consolidated financial position.
25
An impairment in the carrying value of goodwill and other indefinite-lived intangible assets could negatively affect our
operating results.
We have a substantial amount of goodwill and purchased intangible assets on our balance sheet as a result of acquisitions we have
completed. The carrying value of goodwill represents the fair value of an acquired business in excess of identifiable assets and
liabilities as of the acquisition date. The carrying value of indefinite-lived intangible assets represents the fair value of trademarks
and trade names as of the acquisition date. We do not amortize goodwill and indefinite-lived intangible assets that we expect to
contribute indefinitely to our cash flows, but instead we evaluate these assets for impairment at least annually, or more frequently
if potential interim indicators exist that could result in impairment. In testing for impairment, if we believe, as a result of a
qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the
quantitative two-step goodwill impairment test is required. In the two-step goodwill impairment test, if the carrying value of a
reporting unit exceeds its current fair value as determined based on the discounted future cash flows of the reporting unit and
market comparable sales and earnings multiples, the goodwill or intangible asset is considered impaired and is reduced to fair
value via a non-cash charge to earnings. Events and conditions that could result in impairment include a prolonged period of
global economic weakness and tight credit markets, further decline in economic conditions or a slow, weak economic recovery,
as well as sustained declines in the price of our common stock, adverse changes in interest rates, or other factors leading to
reductions in the long-term sales or profitability that we expect. Determination of the fair value of a reporting unit includes
developing estimates which are highly subjective and incorporate calculations that are sensitive to minor changes in underlying
assumptions. Management’s assumptions change as more information becomes available. Changes in these assumptions could
result in an impairment charge in the future, which could have a significant adverse impact on our reported earnings.
We are dependent upon third-party suppliers, making us vulnerable to supply shortages and price increases.
We obtain materials and manufactured components from third-party suppliers. In the absence of labor strikes or other unusual
circumstances, substantially all materials and components are normally available from multiple suppliers. However, certain of
our businesses receive materials and components from a single source supplier, although alternative suppliers of such materials
are generally available. Delays in our suppliers’ abilities, especially any sole suppliers for a particular business, to provide us with
necessary materials and components may delay production at a number of our manufacturing locations, or may require us to seek
alternative supply sources. Delays in obtaining supplies may result from a number of factors affecting our suppliers, including
capacity constraints, labor disputes, suppliers’ impaired financial condition, suppliers’ allocations to other purchasers, weather
emergencies or acts of war or terrorism. Any delay in receiving supplies could impair our ability to deliver products to our
customers and, accordingly, could have a material adverse effect on our business, results of operations and financial condition.
Principal materials and components used in our various manufacturing processes include steel, castings, engines, tires, hydraulics,
cylinders, drive trains, electric controls and motors, and a variety of other commodities and fabricated or manufactured items.
Extreme movements in the cost of these materials and components may affect our financial performance. If we are not able to
recover increased raw material or component costs from our customers, our margins could be adversely affected.
In addition, we purchase material and services from our suppliers on terms extended based on our overall credit rating. Deterioration
in our credit rating may impact suppliers’ willingness to extend terms and in turn increase the cash requirements of our business.
We are subject to currency fluctuations.
Our products are sold in over 100 countries around the world. The reporting currency for our consolidated financial statements
is the U.S. dollar. Certain of our assets, liabilities, expenses, revenues and earnings are denominated in other countries’ currencies,
including the euro and British pound sterling. Those assets, liabilities, expenses, revenues and earnings are translated into U.S.
dollars at the applicable exchange rates to prepare our consolidated financial statements. Therefore, increases or decreases in
exchange rates between the U.S. dollar and those other currencies affect the value of those items as reflected in our consolidated
financial statements, even if their value remains unchanged in their original currency. We may buy protecting or offsetting positions
(known as “hedges”) in certain currencies to reduce the risk of an adverse currency exchange movement. We have not engaged
in any speculative hedging activities. Although we partially hedge our revenues and costs, currency fluctuations may impact our
financial performance in the future.
26
We are exposed to political, economic and other risks that arise from operating a multinational business.
Our operations are subject to a number of potential risks. Such risks principally include:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
trade protection measures and currency exchange controls;
labor unrest;
regional economic conditions;
political instability;
terrorist activities and the U.S. and international response thereto;
restrictions on the transfer of funds into or out of a country;
export duties and quotas;
domestic and foreign customs and tariffs;
current and changing regulatory environments;
difficulties protecting our intellectual property;
transportation delays and interruptions;
costs and difficulties in integrating, staffing and managing international operations, especially in developing markets
such as China, India, Brazil, Russia and the Middle East;
difficulty in obtaining distribution support; and
current and changing tax laws.
In addition, many of the nations in which we operate have developing legal and economic systems adding greater uncertainty to
our operations in those countries than would be expected in North America and Western Europe. These factors may have an
adverse effect on our international operations in the future.
We are subject to the Foreign Corrupt Practices Act (“FCPA”) and other laws that prohibit engaging in corruption for the purpose
of obtaining or retaining business. Our global activities and distribution model are subject to the risk of corruption by our employees
and in addition, our sales agents, distributors, dealers and other third parties that transact Terex business particularly because these
parties are generally not subject to our control. We have an internal policy that expressly prohibits engaging in any commercial
bribery and public corruption, including facilitation payments. We conduct corruption risk assessments, we have implemented
training programs for our employees with respect to the Company’s prohibition against public corruption and commercial bribery,
and we perform reputational due diligence on certain third parties that transact Terex business. In addition, we conduct transaction
testing to assess compliance with our internal anti-corruption policy and procedures. However, we cannot assure you that our
policies, procedures and programs always will protect us from reckless or criminal acts committed by our employees or third
parties that transact Terex business. We have a zero tolerance policy for violations of anti-corruption laws and our anti-corruption
policy. In the event that we believe or have reason to believe that our employees, agents, distributors or other third parties that
transact Terex business have or may have violated applicable anti-corruption laws, including the FCPA, we investigate or have
outside counsel investigate the relevant facts and circumstances. Any violations of the FCPA or other anti-corruption laws could
result in significant fines, criminal sanctions against us or our employees, prohibitions on the conduct of our business, including
our business with the U.S. government, and a violation of our injunction or cease and desist order with the SEC. See Risk Factor
entitled, “We must comply with an injunction and related obligations resulting from the settlement of an SEC investigation.”
We continue to increase our presence in developing markets such as China, India, Brazil, Russia and the Middle East. Increasing
these efforts will require us to hire, train and retain qualified personnel in countries where language, cultural or regulatory barriers
may exist. Any significant difficulties in continuing to expand our operations in developing markets may divert management’s
attention from our existing operations and require a greater level of resources than we plan to commit.
Expansion into developing markets may require modification of products to meet local requirements or preferences. Modification
to the design of our products to meet local requirements and preferences may take longer or be more costly than we anticipate and
could have a material adverse effect on our ability to achieve international sales growth.
A material disruption to one of our significant manufacturing plants could adversely affect our ability to generate revenue.
We produce most of our machines and aftermarket parts for each product type at one manufacturing facility. If operations at a
significant facility were to be disrupted as a result of equipment failures, natural disasters, work stoppages, power outages or other
reasons, our business, financial conditions and results of operations could be adversely affected. Interruptions in production could
increase costs and delay delivery of units in production. Production capacity limits could cause us to reduce or delay sales efforts
until production capacity is available.
27
We may be adversely impacted by work stoppages and other labor matters.
As of December 31, 2012, we employed approximately 21,300 people worldwide. While we have no reason to believe that we
will be impacted by work stoppages or other labor matters, we cannot assure that future issues with our team members or labor
unions will be resolved favorably or that we will not encounter future strikes, further unionization efforts or other types of conflicts
with labor unions or our team members. Any of these factors may have an adverse effect on us or may limit our flexibility in
dealing with our workforce.
Compliance with environmental regulations could be costly and require us to make significant expenditures.
We generate hazardous and nonhazardous wastes in the normal course of our manufacturing operations. As a result, we are subject
to a wide range of environmental laws and regulations. These laws and regulations govern actions that may have adverse
environmental effects and require compliance with certain practices when handling and disposing of hazardous and nonhazardous
wastes. These laws and regulations also impose liability for the costs of, and damages resulting from, cleaning up sites, past spills,
disposals and other releases of hazardous substances, should any of such events occur. No such incidents have occurred which
required us to pay material amounts to comply with such laws and regulations.
In addition, increasing laws and regulations dealing with the environmental aspects of the products we manufacture can result in
significant expenditures in designing and manufacturing new forms of equipment that satisfy such new laws and regulations. In
particular, climate change is receiving increasing attention worldwide. Many scientists, legislators and others attribute climate
change to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory
efforts to limit greenhouse gas emissions. While additional regulation of emissions in the future appears likely, it is too early to
predict how this regulation will ultimately affect our business, operations or financial results, although government policies limiting
greenhouse gas emissions of our products will likely require increased compliance expenditures on our part.
We are also continuing the transition to Tier 4 power systems. While plans are in place to comply with the phase-in of Tier 4
regulations, we are dependent on our engine suppliers to continue to timely deliver. A failure to timely receive appropriate engines
from our suppliers could result in our being placed in uncompetitive positions or without finished product when needed. Compliance
with environmental laws and regulations has required, and will continue to require, us to make expenditures, however we do not
expect these expenditures to have a material adverse effect on our business or results of operations.
We face litigation and product liability claims, class action lawsuits and other liabilities.
In our lines of business, numerous suits have been filed alleging damages for accidents that have occurred during the use or
operation of our products. We are also engaged as a defendant in various legal proceedings with respect to intellectual property
rights, including our legal proceeding involving Metso Minerals Inc. (“Metso”). For more detail, see “Item 3 – Legal Proceedings.”
We are self-insured, up to certain limits, for these product liability exposures, as well as for certain exposures related to general,
workers’ compensation and automobile liability. Insurance coverage is obtained for catastrophic losses as well as those risks
required to be insured by law or contract. We do not believe that the outcome of such matters will have a material adverse effect
on our consolidated financial position; however, any significant liabilities not covered by insurance could have an adverse effect
on our financial condition.
We are the subject of a securities class action lawsuit, an Employee Retirement Income Security Act of 1974 (“ERISA”) class
action lawsuit and a stockholder derivative lawsuit. These lawsuits generally cover the time period from February 2008 to February
2009 and allege, among other things, that certain of our SEC filings and other public statements contained false and misleading
statements which resulted in damages to the plaintiffs and the members of the purported class when they purchased our securities
and that there were breaches of fiduciary duties and of disclosure requirements under ERISA. We believe that the allegations in
the suits are without merit, and Terex, its directors and the named executives will vigorously defend against them. We believe that
we have acted, and continue to act, in compliance with federal securities laws and ERISA law with respect to these matters.
However, the outcome of the lawsuits cannot be predicted and, if determined adversely, could ultimately result in us incurring
significant liabilities.
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We must comply with an injunction and related obligations resulting from the settlement of an SEC investigation.
In August 2009, a final court decree formalized the settlement that was entered into to resolve the previously disclosed SEC
investigation of Terex related mainly to (1) certain transactions between us and United Rentals, Inc. that took place in 2000 and
2001, and one transaction between United Rentals, Inc. and one of our subsidiaries that took place in 2001 before that subsidiary
was acquired by Terex, and (2) the circumstances of the restatement of certain of our financial statements for the years 2000-2004.
The settlement resolved all matters relating to the potential liability of Terex, but did not address our current or former employees.
Under the terms of the settlement, we paid a civil penalty of $8 million in August 2009 and we consented, without admitting or
denying the SEC’s allegations, to the entry of a judgment which enjoins us from committing or aiding and abetting any future
violations of the anti-fraud, books and records, reporting and internal control provisions of the federal securities laws and related
SEC rules.
We and our directors, officers and employees are required to comply at all times with the terms of this injunction. In addition, in
1999 regarding a separate and unrelated SEC investigation, we consented to the entry of an administrative cease and desist order
prohibiting future violations of certain provisions of the federal securities laws. As a result, if we commit or aid or abet any future
violations of the anti-fraud, books and records, reporting and internal control provisions of the federal securities laws and related
SEC rules, we are likely to suffer severe penalties, financial and otherwise, that could have a material negative impact on our
business and results of operations.
We are in the process of implementing a global enterprise system.
We are implementing a global enterprise resource planning system to replace many of our existing operating and financial systems.
Such an implementation is a major undertaking, both financially and from a management and personnel perspective. Should the
system not be implemented successfully, or if the system does not perform in a satisfactory manner, it could disrupt and might
adversely affect our operations and results of operations, including our ability to report accurate and timely financial results.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.
29
ITEM 2.
PROPERTIES
As of December 31, 2012, our principal manufacturing, warehouse, service and office facilities comprised a total of approximately
14 million square feet of space worldwide. The following table outlines the principal manufacturing, warehouse, service and
office facilities owned or leased (as indicated below) by the Company and its subsidiaries:
BUSINESS UNIT
FACILITY LOCATION
BUSINESS UNIT
FACILITY LOCATION
MHPS
MP
Solon, Ohio
Sydney, Australia
Salzburg, Austria
Cotia, Brazil
Shanghai, China (1)
Xiamen, China
Slany, Czech Republic
Banbury, England (1)
Düsseldorf, Germany
Luisenthal, Germany
Uslar, Germany
Wetter an der Ruhr, Germany
Würzburg, Germany
Chakan, India (1)
Lentigione, Italy
Milan, Italy (1)
Boksburg, South Africa
Madrid, Spain (1)
Dietlikon, Switzerland
Durand, Michigan
Farwell, Michigan (1)
Quanzhou, China
Coalville, England
Hosur, India
Subang Jaya, Malaysia (1)
Omagh, Northern Ireland (1)
Dungannon, Northern Ireland (1)
Construction
Terex (Corporate Offices) Westport, Connecticut (1)
Rock Hill, South Carolina
AWP
Huron, South Dakota
Watertown, South Dakota
Moses Lake, Washington (1)
North Bend, Washington (1)
Redmond, Washington (1)
Darra, Australia (1)
Betim, Brazil (1)
Changzhou, China
Umbertide, Italy
Fort Wayne, Indiana
Southaven, Mississippi (1)
Grand Rapids, Minnesota
Oklahoma City, Oklahoma
Canton, South Dakota
Cachoeirinha, Brazil
Coventry, England (1)
Bad Schoenborn, Germany
Crailsheim, Germany
Gerabronn, Germany
Langenburg, Germany
Rothenburg, Germany (2)
Greater Noida, Uttar Pradesh, India (1)
Motherwell, Scotland (1)
Waverly, Iowa
Brisbane, Australia (1)
Jinan, China
Long Crendon, England
Montceau-les-Mines, France
Bierbach, Germany (1)
Zweibruecken-Dinglerstrasse, Germany
Zweibruecken-Wallerscheid, Germany (1)
Pecs, Hungary (1)
Crespellano, Italy
Fontanafredda, Italy
Cranes
(1)
(2)
These facilities are either leased or subleased.
Approximately 50% of this facility is leased.
We also have numerous owned or leased locations for new machine and parts sales and distribution and rebuilding of components
located worldwide.
We believe that the properties listed above are suitable and adequate for our use. We have determined that certain of our other
properties exceed our requirements. Such properties may be sold, leased or utilized in another manner and have been excluded
from the above list. We are actively marketing some of these properties for sale.
30
ITEM 3.
LEGAL PROCEEDINGS
General
As described in Note Q – “Litigation and Contingencies” in the Notes to the Consolidated Financial Statements, we are involved
in various legal proceedings, including product liability, general liability, workers’ compensation liability, employment, commercial
and intellectual property litigation, which have arisen in the normal course of operations. We are insured for product liability,
general liability, workers’ compensation, employer’s liability, property damage and other insurable risk required by law or contract
with retained liability to us or deductibles. We believe that the outcome of such matters, individually and in the aggregate, will
not have a material adverse effect on our consolidated financial position. However, the outcomes of lawsuits cannot be predicted
and, if determined adversely, could ultimately result in us incurring significant liabilities which could have a material adverse
effect on our results of operations.
ERISA, Securities and Stockholder Derivative Lawsuits
We have received complaints seeking certification of class action lawsuits in an ERISA lawsuit, a securities lawsuit and a stockholder
derivative lawsuit as follows:
• A consolidated complaint in the ERISA lawsuit was filed in the United States District Court, District of Connecticut on
September 20, 2010 and is entitled In Re Terex Corp. ERISA Litigation.
• A consolidated class action complaint for violations of securities laws in the securities lawsuit was filed in the United
States District Court, District of Connecticut on November 18, 2010 and is entitled Sheet Metal Workers Local 32 Pension
Fund and Ironworkers St. Louis Council Pension Fund, individually and on behalf of all others similarly situated v. Terex
Corporation, et al.
• A stockholder derivative complaint for violation of the Securities and Exchange Act of 1934, breach of fiduciary duty,
waste of corporate assets and unjust enrichment was filed on April 12, 2010 in the United States District Court, District
of Connecticut and is entitled Peter Derrer, derivatively on behalf of Terex Corporation v. Ronald M. DeFeo, Phillip C.
Widman, Thomas J. Riordan, G. Chris Andersen, Donald P. Jacobs, David A. Sachs, William H. Fike, Donald DeFosset,
Helge H. Wehmeier, Paula H.J. Cholmondeley, Oren G. Shaffer, Thomas J. Hansen, and David C. Wang, and Terex
Corporation.
These lawsuits generally cover the period from February 2008 to February 2009 and allege, among other things, that certain of
our SEC filings and other public statements contained false and misleading statements which resulted in damages to the Company,
the plaintiffs and the members of the purported class when they purchased our securities and in the ERISA lawsuit and the
stockholder derivative complaint, that there were breaches of fiduciary duties and of ERISA disclosure requirements. The
stockholder derivative complaint also alleges waste of corporate assets relating to the repurchase of our shares in the market and
unjust enrichment as a result of securities sales by certain officers and directors. The complaints all seek, among other things,
unspecified compensatory damages, costs and expenses. As a result, we are unable to estimate a loss or a range of losses for these
lawsuits. The stockholder derivative complaint also seeks amendments to our corporate governance procedures in addition to
unspecified compensatory damages from the individual defendants.
We believe that the allegations in the suits are without merit, and Terex, its directors and the named executives will continue to
vigorously defend against them. We believe that we have acted, and continue to act, in compliance with federal securities laws
and ERISA law with respect to these matters. Accordingly, on November 19, 2010 we filed a motion to dismiss the ERISA lawsuit
and on January 18, 2011 we filed a motion to dismiss the securities lawsuit. These motions are currently pending before the court.
The plaintiff in the stockholder derivative lawsuit has agreed with us to put this lawsuit on hold pending the outcome of the motion
to dismiss in connection with the securities lawsuit.
31
Post-Closing Dispute with Bucyrus
We were involved in a dispute with Bucyrus International, Inc. (“Bucyrus,” which was subsequently purchased by Caterpillar,
Inc., (“Caterpillar”)) regarding the calculation of the value of the net assets of the Mining business (the “Dispute”). Bucyrus
initially provided us with their calculation of the net asset value of the Mining business, which sought a payment of approximately
$149 million from us to Bucyrus. In January 2013, we reached an agreement with Caterpillar that settled the Dispute. As part of
the settlement, we made a payment to Caterpillar of an immaterial amount.
Powerscreen Patent Infringement Lawsuit
On December 6, 2010, we received an adverse jury verdict in the amount of $15.8 million in a patent infringement lawsuit brought
against Powerscreen International Distribution Limited (“Powerscreen”) and Terex by Metso in the United States District Court
for the Eastern District of New York. The lawsuit involved a claim by Metso that the folding side conveyor of certain Powerscreen
screening plants violated a patent held by Metso in the United States. Following the verdict, Metso sought additional relief,
including, additional damages, attorney’s fees, interest and trebling of all such amounts. On December 9, 2011, the District Court
entered a judgment in support of the jury verdict and issued an injunction preventing marketing or selling of certain models of
Powerscreen mobile screening plants with the alleged infringing folding side conveyor design in the United States. Metso was
also awarded certain additional damages, interest and doubling of all such amounts. The Court declined to calculate the final
amount of monetary damages pending outcome of the appeal. The accused models have been updated with Powerscreen’s new
proprietary S range of conveyors. Thus, the judgment and injunction do not affect the continued sale or use of any current model
of Powerscreen mobile screening plants.
We do not agree that the accused Powerscreen mobile screening plants or their folding conveyor infringe the subject patent held
by Metso. These types of patent cases are complex and we strongly believe that the verdict is contrary to both the law and the
facts. We have appealed the verdict, posted an appeal bond in the amount of $50 million while judgment is stayed pending the
appeal process, and believe that we will ultimately prevail on appeal. However, the outcomes of lawsuits cannot be predicted and,
if determined adversely, could ultimately result in us being required to make a significant cash payment, which could have a
material adverse effect on our results of operations.
For information concerning other contingencies and uncertainties, see “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Contingencies and Uncertainties.”
ITEM 4.
MINE SAFETY DISCLOSURE
Not applicable.
32
PART II
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(a) Our common stock, par value $.01 per share (“Common Stock”) is listed on the NYSE under the symbol “TEX.” The high
and low quarterly stock prices for our Common Stock on the NYSE Composite Tape (for the last two completed years) are as
follows:
Fourth
Third
Second
First
Fourth
Third
Second
First
2012
2011
High
Low
$
$
28.33
20.41
$
$
26.20
14.05
$
$
25.34
14.89
$
$
26.77
14.10
$
$
18.51
9.30
$
$
29.87
10.21
$
$
38.43
24.59
$
$
38.50
28.19
No dividends were declared or paid in 2012 or 2011. Certain of our debt agreements contain restrictions as to the payment of cash
dividends to stockholders. In addition, Delaware law limits payment of dividends. We intend generally to retain earnings, if any,
to fund the development and growth of our business, pay down debt or repurchase stock. We may consider paying dividends on
the Common Stock at some point in the future, subject to the limitations described above. Any future payments of cash dividends
will depend upon our financial condition, capital requirements and earnings, as well as other factors that the Board of Directors
may deem relevant.
As of February 21, 2013, there were 1,005 stockholders of record of our Common Stock.
Performance Graph
The following stock performance graph is intended to show our stock performance compared with that of comparable companies.
The stock performance graph shows the change in market value of $100 invested in our Common Stock, the Standard & Poor’s
500 Stock Index and our Peer Group (as defined below) for the period commencing December 31, 2007 through December 31,
2012. The cumulative total stockholder return assumes dividends are reinvested. The stockholder return shown on the graph
below is not indicative of future performance. The companies in the Peer Group are weighted by market capitalization. Our peer
group is aligned with the peer group that is used by our Compensation Committee in benchmarking our executive officer’s
compensation.
The Peer Group consists of the following companies that are in our same industry, of comparable revenue size to us and/or other
manufacturing companies: AGCO Corporation, Cameron International Corporation, Carlisle Companies Inc., Crane Company,
Cummins Inc., Danaher Corporation, Dover Corporation, Eaton Corporation, Flowserve Corporation, FMC Technologies, Inc.,
Hubbell Inc., Illinois Tool Works Inc., Ingersoll-Rand Plc, Joy Global Inc., Lennox International Inc., The Manitowoc Company,
Inc., Meritor Inc., Nacco Industries Inc., Navistar International Corporation, Oshkosh Corporation, Paccar Inc., Pall Corporation,
Parker-Hannifin Corporation, Rockwell Automation, Inc., Roper Industries Inc., SPX Corporation, Textron Inc. and Timken
Company.
33
Terex Corporation
S&P 500
Peer Group
12/07
100.00
100.00
100.00
12/08
26.41
63.00
50.67
12/09
30.21
79.67
76.57
12/10
47.34
91.67
110.22
12/11
20.60
93.61
98.32
12/12
42.87
108.59
118.89
Copyright© 2013 Standard & Poor’s, a division of The McGraw-Hill Companies Inc. All rights reserved. (www.researchdatagroup.com/S&P.htm)
(b) Not applicable.
(c) The following table provides information about purchases during the quarter ended December 31, 2012 of our common stock
that is registered by us pursuant to the Exchange Act.
Issuer Purchases of Equity Securities
Period
October 1, 2012 – October 31, 2012
November 1, 2012 – November 30, 2012 (1)
December 1, 2012 – December 31, 2012 (1)
Total
(a) Total Number of
Shares Purchased
(b) Average Price
Paid per Share
—
490
648
1,138
—
$23.10
$25.67
$24.56
(c) Total Number
of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs
—
—
—
—
(d) Approximate
Dollar Value of
Shares that May
Yet be Purchased
Under the Plans
or Programs (in
thousands)
—
—
—
—
(1)
In the fourth quarter of 2012, the Company accepted 1,138 shares of common stock from employees of the Company as payment for option exercises.
34
ITEM 6.
SELECTED FINANCIAL DATA
FIVE-YEAR SELECTED FINANCIAL DATA
The following table summarizes our selected financial data and should be read in conjunction with the more detailed Consolidated
Financial Statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
(in millions, except per share amounts and employees)
SUMMARY OF OPERATIONS
Net sales
Goodwill impairment
Income (loss) from operations
Income (loss) from continuing operations
Income (loss) from discontinued operations – net of tax
Gain (loss) on disposition of discontinued operations – net of tax
Net income (loss) attributable to common stockholders
Per Common and Common Equivalent Share:
Basic attributable to common stockholders
Income (loss) from continuing operations
Income (loss) from discontinued operations – net of tax
Gain (loss) on disposition of discontinued operations – net of tax
Net income (loss) attributable to common stockholders
Diluted attributable to common stockholders
Income (loss) from continuing operations
Income (loss) from discontinued operations – net of tax
Gain (loss) on disposition of discontinued operations – net of tax
Net income (loss) attributable to common stockholders
CURRENT ASSETS AND LIABILITIES
Current assets
Current liabilities
PROPERTY, PLANT AND EQUIPMENT
Net property, plant and equipment
Capital expenditures
Depreciation
TOTAL ASSETS
CAPITALIZATION
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
2012
2011
2010
2009
2008
$ 7,348.4
$ 6,504.6
$ 4,418.2
$ 3,858.4
$ 7,958.9
—
398.6
101.4
1.8
0.4
105.8
0.94
0.02
—
0.96
0.91
0.02
—
0.93
$
$
$
$
—
81.2
34.1
5.8
0.8
45.2
0.35
0.05
0.01
0.41
0.35
0.05
0.01
0.41
—
(73.8)
(211.5)
(15.3)
589.3
358.5
—
(459.9)
(401.7)
(406.4)
21.7
(12.6)
(398.4)
170.8
(74.7)
150.4
—
71.9
$
(1.98) $
(3.97) $
(0.80)
(0.14)
5.42
3.30
0.21
(0.12)
(3.88)
1.53
—
0.73
$
(1.98) $
(3.97) $
(0.80)
(0.14)
5.42
3.30
0.21
(0.12)
(3.88)
1.53
—
0.73
$ 3,797.4
$ 4,053.2
$ 3,986.9
$ 3,914.6
$ 4,040.9
1,708.8
1,890.9
1,674.2
1,554.7
1,824.6
$
813.3
$
835.5
$
573.5
$
605.0
$
408.4
82.5
100.4
79.1
89.5
55.0
78.6
50.4
70.2
103.6
62.9
$ 6,746.2
$ 7,063.4
$ 5,516.4
$ 5,713.8
$ 5,445.4
Long-term debt and notes payable (includes capital leases)
$ 2,098.7
$ 2,300.4
$ 1,686.3
$ 1,966.4
$ 1,435.5
Total Terex Corporation Stockholders’ Equity
2,007.7
1,910.3
2,083.2
1,650.2
1,721.7
Dividends per share of Common Stock
Shares of Common Stock outstanding at year end
EMPLOYEES
—
109.9
—
108.8
—
108.1
—
107.3
—
94.0
21,300
22,600
16,300
15,000
16,500
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Notes to the Consolidated Financial
Statements for a discussion of “Discontinued Operations,” “Acquisitions,” “Goodwill,” “Long-Term Obligations” and “Stockholders’ Equity.”
35
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BUSINESS DESCRIPTION
Terex is a diversified global equipment manufacturer of specialized machinery products. We are focused on delivering reliable,
customer-driven solutions for a wide range of commercial applications, including the construction, infrastructure, quarrying,
mining, manufacturing, shipping, transportation, refining, energy and utility industries. We operate in five reportable segments:
(i) AWP; (ii) Construction; (iii) Cranes; (iv) MHPS; and (v) MP.
Our AWP segment designs, manufactures, refurbishes, services and markets aerial work platform equipment, telehandlers, light
towers, bridge inspection equipment and utility equipment, as well as their related components and replacement parts. Customers
use these products to construct and maintain industrial, commercial and residential buildings and facilities, construct and maintain
utility and telecommunication lines, trim trees, in construction and foundation drilling applications and for other commercial
operations, as well as in a wide range of infrastructure projects.
Our Construction segment designs, manufactures and markets heavy and compact construction equipment, roadbuilding equipment,
including asphalt and concrete equipment and landfill compactors, as well as their related components and replacement parts.
Customers use our products in construction and infrastructure projects, in building roads and bridges, in quarrying and mining
operations and for material handling applications.
On February 11, 2013, we announced that we entered into a definitive agreement to divest our Roadbuilding operations in Brazil
and assets for our asphalt paver, reclaimer/stabilizer and material transfer product lines which are currently manufactured in
Oklahoma City. The transaction is anticipated to close during the first quarter of 2013. We have also determined that we will be
exiting the remaining roadbuilding product lines that we manufacture in Oklahoma City.
Our Cranes segment designs, manufactures, services and markets mobile telescopic cranes, tower cranes, lattice boom crawler
cranes, lattice boom truck cranes and truck-mounted cranes (boom trucks), as well as their related components and replacement
parts. Our Cranes products are used primarily for construction, repair and maintenance of commercial buildings, manufacturing
facilities and infrastructure projects.
Our MHPS segment designs, manufactures, refurbishes, services and markets industrial cranes, including standard 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, gantry cranes, ship-to-shore 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. The segment
operates an extensive global sales and service network. Customers use these products for material handling at manufacturing,
port and rail facilities.
The MHPS segment was formed upon the completion of our acquisition of a majority interest in the shares of Demag Cranes AG.
See Note I – “Acquisitions.” Accordingly, the results of Demag Cranes AG and its subsidiaries (“Demag Cranes”) are consolidated
within MHPS from its date of acquisition. We acquired the port equipment businesses of Reggiane Cranes and Plants S.p.A. and
Noell Crane Holding GmbH (collectively, “Terex Port Equipment” or the “Port Equipment Business”) on July 23, 2009.
Subsequently, effective July 1, 2012, we realigned certain operations to provide a single source for serving port equipment
customers. The Terex Port Equipment Business and our French reach stacker business, both formerly part of our Cranes segment,
are now consolidated within our MHPS segment. As a result, the 2011 performance of this segment reflects approximately four
and a half months of operations of Demag Cranes. Accordingly, comparisons between the years ended December 31, 2012, 2011
and 2010, respectively must be reviewed in this context.
Our MP segment designs, manufactures and markets materials processing equipment, including crushers, washing systems, screens,
apron feeders, chippers and related components and replacement parts. Customers use our MP products in construction,
infrastructure and recycling projects, in various quarrying and mining applications, as well as in landscaping and biomass production
industries.
36
On February 19, 2010, we completed the disposition of our Mining business to Bucyrus. The results of the Mining business were
consolidated within the former Materials Processing & Mining Segment. In March 2010, we sold the assets of our Powertrain
pumps business and gears business. The results of these businesses were formerly consolidated within the Construction segment.
On March 10, 2010, we entered into a definitive agreement to sell our Atlas heavy construction equipment and knuckle-boom
crane businesses. The results of these businesses were formerly consolidated within the Construction and Cranes segments,
respectively. On April 15, 2010, we completed the portion of this transaction related to the operations in Germany and completed
the portion of this transaction related to the operation in the United Kingdom on August 11, 2010. Due to the divestiture of these
businesses, the reporting of these businesses has been included in discontinued operations for all periods presented.
We assist customers in their rental, leasing and acquisition of our products through TFS. TFS uses its equipment financing
experience to provide financing solutions to our customers who purchase our equipment.
Subsequent to December 31, 2012, we realigned certain operations in an effort to strengthen our ability to service customers and
to recognize certain organizational efficiencies. Our Utilities business, formerly part of our AWP segment, will be consolidated
within our Cranes segment for financial reporting periods beginning on or after January 1, 2013. Our Crane America Services
business, formerly part of our MHPS segment, and our legacy AWP services business, formerly part of our AWP segment, will
both be consolidated within our Cranes segment for financial reporting periods beginning on or after January 1, 2013 and will be
run together as our North America Services business.
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 as income from operations plus certain impairments and write downs,
depreciation, amortization, proceeds from the sale of assets, plus or minus cash changes in working capital, customer advances
and rental/demo equipment and less capital expenditures. We believe that the measure of free cash flow provides management
and investors further information on cash generation or use.
We discuss forward looking information related to expected earnings per share (“EPS”) excluding restructuring charges and other
items. This adjusted EPS is a non-GAAP measure that provides guidance to investors about our expected EPS excluding
restructuring or other charges that we do not believe are reflective of our ongoing earnings.
Working capital is calculated using the Consolidated Balance Sheet amounts for Trade receivables (net of allowance) plus
Inventories, less Trade accounts payable and Customer advances. We view excessive working capital as an inefficient use of
resources, and seek to minimize the level of investment without adversely impacting the ongoing operations of the business.
Trailing three month annualized net sales is calculated using the net sales for the most recent quarter multiplied by four. The ratio
calculated by dividing working capital by trailing three months annualized net sales is a non-GAAP measure that we believe
measures our resource use efficiency.
37
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.
Overview
We made significant progress in 2012. Our goals were margin improvement, cash generation and integration of Demag Cranes
AG and our performance reflected the attention given to these goals.
Although we were impacted in the second half of the year by challenging markets in Europe and Asia, net sales increased moderately,
primarily due to acquisitions, and our income from operations increased substantially year-over-year. Our income from operations
increased by over $300 million in 2012. We accomplished this improvement by focusing on margins and containing costs, as
actions taken in 2011 continued to have a favorable impact on our current results. See Note L – “Restructuring and Other Charges”
in our Consolidated Financial Statements for a detailed description of our restructuring activities, including the reasons, timing
and costs associated with such actions.
We generated free cash flow of approximately $554 million in 2012, significantly more than the $168.0 million in free cash flow
generated in 2011. We have made good progress in the integration of our Demag Cranes AG acquisition and believe we will exceed
in 2013 the originally targeted $35 million in annual savings. We also expect to realize the benefits of realigning our Port Equipment
Business into the MHPS segment, which will provide our port and rail customers with a single source of access to our extensive
portfolio of products.
We also took several important steps during 2012 to further improve our capital structure and operating results by reducing interest
expense through purchasing approximately 25% of our 4% Convertible Notes, redeeming our 10-7/8 % Senior Notes and refinancing
our 8% Senior Subordinated Notes with 6% Senior Notes. In addition, we amended our 2011 Credit Agreement in October 2012
to, among other things, reduce our interest rates. See Note M – “Long-Term Obligations” in our Consolidated Financial Statements
for further details regarding these actions.
While we generally achieved the overall performance we expected for 2012, the mix of performance among the segments was
varied. Our results match the trends we have observed on a macroeconomic level with the market environment for some of our
categories of equipment showing pockets of strength and others showing weakened demand. Three segments performed well in
2012 and we expect this to continue in 2013. Our AWP segment continued to see strong replacement demand for its products in
the North American rental channel as well as some evidence of fleet growth and delivered double digit operating margins for the
full year. Our Cranes segment experienced continued strong performance in certain products and regions and our MP operating
performance remained solid. Both of these segments delivered double digit operating margins in the fourth quarter of 2012.
Our two remaining segments did not perform as well in 2012, but we are actively managing these businesses to improve performance.
We have made good progress in integrating our MHPS segment. Benefits are expected from cost synergies globally to help offset
weak European markets. We believe the weak markets should stabilize in 2013 and the benefits of the big port projects we have
won are expected to be seen in our results in the second half of 2013 and 2014. Although our Construction segment returned to
profitability in the first half of 2012, we had a difficult second half in 2012 as market conditions began to soften, particularly in
Europe, and we took and continue to take strategic actions to improve our performance. We recently announced an agreement to
sell or exit the majority of our roadbuilding product lines. In addition, we plan to exit a number of compact construction component
manufacturing businesses in Germany. Many of these businesses were generating poor returns and we expect these actions to
improve operating results. We will continue to rationalize costs in our Construction businesses while pursuing non-traditional
distribution channels, such as the recently announced supply agreement with Takeuchi.
We are seeing improvements in many of our end-markets and believe the macro-economic uncertainty that affected our fourth
quarter performance will abate by the middle of 2013. We anticipate a good portion of this improvement to come from our AWP
segment where we expect increased price realization and increased net sales volume. For 2013, we are expecting the AWP operating
margin to be in the 11% to 14% range. In the Construction segment we are expecting a 1% to 3% operating margin as we do not
expect too much benefit from divestitures and restructuring until later in the year. In the Cranes segment, we are anticipating a
10% to 12% operating margin as we expect to benefit from the cost reductions and margin improvement efforts that took place
in 2012. We do not expect significant margin improvements in the MHPS segment in 2013, but we are expecting operating margins
of 3% to 5%. We also anticipate that there will be further changes during the year that adapt the structural cost to the realities of
the current market for this segment and there may be some charges for these changes that we have not yet anticipated. In the MP
segment, we are expecting an 11% to 13% operating margin.
38
Entering 2013, we remain committed to profitable growth, generating cash and realizing the integration benefits of MHPS. When
balancing the different demand environments in each of our businesses, we are expecting 2013 earnings per share to be between
$2.40 and $2.70 (excluding restructuring and unusual items) on net sales of between $7.9 billion and $8.3 billion. Similar to 2012,
we expect to generate more than $500 million in free cash flow during 2013, with an aim to reduce outstanding indebtedness. We
expect a tax rate of 36%, which is slightly higher than the 35% rate in 2012, due to increased income in higher tax jurisdictions,
particularly the United States. Other expense is anticipated to be approximately $40 million, which includes the Demag Cranes
shareholder guaranteed payment, debt amortization costs and other items. Our estimated average share count is expected to be
approximately 117 million shares. Capital expenditures are expected to be approximately $130 million. Cash taxes are expected
to be approximately $180 million.
We have also established a 2015 earnings per share goal of $5 from $10 billion in net sales and with a 15% return on invested
capital. These are internal goals for the Company and not guidance.
ROIC continues to be the unifying metric that we use to measure our operating performance. ROIC and the Non-GAAP Measures
assist in showing how effectively we utilize the capital invested in our operations. After-tax ROIC is determined by dividing the
sum of NOPAT for each of the previous four quarters by the average of the sum of Total Terex Corporation stockholders’ equity
plus Debt (as defined below) less Cash and cash equivalents for the previous five quarters. NOPAT for each quarter is calculated
by multiplying Income (loss) from continuing operations by a figure equal to one minus the effective tax rate of the Company.
We believe that returns on capital deployed in TFS do not represent management of our primary operations and, therefore, TFS
finance receivable assets and results from operations have been excluded from the Non-GAAP Measures. Additionally, we do
not believe that the realized and deferred gains on marketable securities reflects our operations and, therefore, such gains have
been excluded from the calculation of the Non-GAAP Measures. The effective tax rate is equal to the (Provision for) benefit
from income taxes divided by Income (loss) before income taxes for the respective quarter. Total Terex Corporation stockholders’
equity is adjusted to include redeemable noncontrolling interest as this item is deemed to be temporary equity and therefore should
be included in the denominator of the ROIC ratio. Debt is calculated using the amounts for Notes payable and current portion of
long-term debt plus Long-term debt, less current portion. We calculate ROIC using the last four quarters’ NOPAT as this represents
the most recent 12-month period at any given point of determination. In order for the denominator of the ROIC ratio to properly
match the operational period reflected in the numerator, we include the average of five quarters’ ending balance sheet amounts so
that the denominator includes the average of the opening through ending balances (on a quarterly basis) thereby providing, over
the same time period as the numerator, four quarters of average invested capital.
Terex management and the Board of Directors use ROIC as one of the primary measures to assess operational performance,
including in connection with certain compensation programs. We use ROIC as a unifying metric because we believe that it
measures how effectively we invest our capital and provides a better measure to compare ourselves to peer companies to assist in
assessing how we drive operational improvement. We believe that ROIC measures return on the amount of capital invested in
our primary businesses, excluding TFS, as opposed to another metric such as return on stockholders’ equity that only incorporates
book equity, and is thus a more accurate and descriptive measure of our performance. We also believe that adding Debt less Cash
and cash equivalents to Total stockholders’ equity provides a better comparison across similar businesses regarding total
capitalization, and ROIC highlights the level of value creation as a percentage of capital invested. As the tables below show, our
ROIC at December 31, 2012 was 8.0%.
The amounts described below are reported in millions of U.S. dollars, except for the effective tax rates. Amounts are as of and
for the three months ended for the periods referenced in the tables below (in millions, except percentages).
39
Dec ’12
Sep ’12
Jun ’12
Mar ’12
Dec ’11
Provision for (benefit from) income taxes
Divided by: Income (loss) before income taxes
Effective tax rate
Income (loss) from operations as adjusted
Multiplied by: 1 minus Effective tax rate
Adjusted net operating income (loss) after tax
Debt (as defined above)
Less: Cash and cash equivalents
Debt less Cash and cash equivalents
$
$
$
(7.5) $
(36.5)
20.5%
26.3
79.5%
20.9
$
$
8.8
$
44.1
$
37.1
23.7%
132.6
76.3%
101.2
$
$
124.6
35.4%
175.5
64.6%
113.4
$
$
8.8
30.4
28.9%
64.2
71.1%
45.6
$ 2,098.7
(678.0)
$ 1,420.7
$ 2,063.8
(542.6)
$ 1,521.2
$ 2,402.8
(841.5)
$ 1,561.3
$ 2,608.5
(973.2)
$ 1,635.3
Total Terex Corporation stockholders’ equity as
adjusted
Debt less Cash and cash equivalents plus Total Terex
Corporation stockholders’ equity as adjusted
$ 2,103.7
$ 2,149.2
$ 2,089.2
$ 1,881.0
$ 3,524.4
$ 3,670.4
$ 3,650.5
$ 3,516.3
$
$
$
$
2,300.4
(774.1)
1,526.3
1,785.4
3,311.7
December 31, 2012 ROIC
NOPAT as adjusted (last 4 quarters)
Average Debt less Cash and cash equivalents plus Total Terex
Corporation stockholders’ equity as adjusted (5 quarters)
8.0%
281.1
3,534.7
$
$
Reconciliation of income (loss) from operations:
Income (loss) from operations as reported
(Income) loss from operations for TFS
Income (loss) from operations as adjusted
Reconciliation of Terex Corporation stockholders’ equity:
Terex Corporation stockholders’ equity as reported
TFS Assets
Redeemable noncontrolling interest
$
$
$
Three
months
ended
12/31/12
Three
months
ended
9/30/12
Three
months
ended
06/30/12
Three
months
ended
03/31/12
27.9 $
(1.6)
26.3 $
131.9 $
175.0 $
0.7
0.5
132.6 $
175.5 $
63.8
0.4
64.2
As of
12/31/12
As of
9/30/12
As of
06/30/12
As of
03/31/12
As of
12/31/11
2,007.7 $
(150.9)
246.9
2,054.6 $
(142.3)
236.9
1,989.6 $
(129.9)
229.5
1,996.7 $
(115.7)
—
1,910.3
(124.6)
—
(0.3)
1,785.4
Deferred loss (gain) on marketable securities
—
—
—
—
Terex Corporation stockholders’ equity as adjusted
$
2,103.7 $
2,149.2 $
2,089.2 $
1,881.0 $
40
RESULTS OF OPERATIONS
2012 COMPARED WITH 2011
Terex Consolidated
2012
2011
Net sales
Gross profit
SG&A
Income from operations
$
$
$
$
7,348.4
1,445.6
1,047.0
398.6
% of
Sales
($ amounts in millions)
—
19.7%
14.2%
5.4%
$
$
$
$
6,504.6
960.3
879.1
81.2
% of
Sales
% Change In
Reported Amounts
—
14.8%
13.5%
1.2%
13.0%
50.5%
19.1%
390.9%
Net sales for the year ended December 31, 2012 increased $843.8 million when compared to 2011. Excluding the effect of the
addition from Demag Cranes AG in both periods and the negative impact of foreign currency exchange rate changes, net sales
increased approximately 3% from the prior year period. The impact of the acquisition of Demag Cranes AG increased net sales
by approximately $822 million due to inclusion in our results for the full year in 2012. Our AWP segment had approximately
20% higher net sales in the current year, while net sales in our other three segments were down slightly when compared to 2011.
Gross profit for the year ended December 31, 2012 increased $485.3 million when compared to 2011. Excluding the impact of
the acquisition of Demag Cranes AG, gross profit improved by approximately $238 million primarily due to improved price
realization and cost reductions. The acquisition of Demag Cranes AG added approximately $248 million to gross profit due to
inclusion in our results for the full year in 2012. The prior year amounts for MHPS included approximately $41 million from
inventory revaluation charges related to the acquisition which did not recur in the current year.
SG&A costs for the year ended December 31, 2012 increased $167.9 million when compared to 2011. Excluding the impacts of
the acquisition of Demag Cranes AG and foreign currency exchange rate changes, SG&A costs were lower by approximately $20
million on higher net sales levels. The acquisition of Demag Cranes AG added approximately $212 million to SG&A costs due
to inclusion in our results for the full year in 2012.
Income from operations improved by $317.4 million for the year ended December 31, 2012 when compared to 2011. The increase
was primarily due to the items noted above particularly, improved price realization and actions taken in previous periods to reduce
our cost structure, as well as the impact of the acquisition of Demag Cranes AG.
Aerial Work Platforms
2012
2011
% of
Sales
($ amounts in millions)
% of
Sales
% Change In
Reported Amounts
Net sales
Gross profit
SG&A
Income from operations
$
$
$
$
2,104.6
437.2
209.5
227.7
—
20.8%
10.0%
10.8%
$
$
$
$
1,750.0
278.3
192.0
86.3
—
15.9%
11.0%
4.9%
20.3%
57.1%
9.1%
163.8%
Net sales for the AWP segment for the year ended December 31, 2012 increased $354.6 million when compared to 2011. We
continued to see growth from replacement-based demand in the North American rental channels for our aerial work platform
products. Price realization also contributed to the increase in net sales. Additionally, the inclusion of an acquired business in the
current year that was not included in the prior year period increased net sales. Utility products net sales and European sales for
aerial work platforms also improved relative to the prior year.
Gross profit for the year ended December 31, 2012 increased $158.9 million when compared to 2011. Improved price realization,
increased net sales, the mix of product sales and lower manufacturing costs, contributed approximately $167 million to the
improvement in gross profit. These improvements were partially offset by approximately $12 million from increased inventory
charges compared to the prior year.
41
SG&A costs for the year ended December 31, 2012 increased $17.5 million when compared to 2011. Higher general and
administrative costs to enable the increased sales levels, as well as costs for an acquired business not included in the prior year
period, increased SG&A spending by approximately $21 million as compared to the prior year.
Income from operations for the year ended December 31, 2012 improved $141.4 million when compared to 2011. The increase
was due to the items noted above, particularly improved price realization and increased net sales volume, partially offset by higher
SG&A.
Construction
2012
2011
% of
Sales
($ amounts in millions)
% of
Sales
% Change In
Reported Amounts
Net sales
Gross profit
SG&A
Loss from operations
$
$
$
$
1,308.7
113.7
157.3
(43.6)
—
8.7 %
12.0 %
(3.3)%
$
$
$
$
1,505.6
163.1
181.5
(18.4)
—
10.8 %
12.1 %
(1.2)%
(13.1)%
(30.3)%
(13.3)%
*
* Not meaningful as a percentage
Net sales for the Construction segment decreased by $196.9 million for the year ended December 31, 2012 when compared to
2011. Weakened demand for our material handling products and a lack of government infrastructure spending in North America
and Brazil negatively impacted our Roadbuilding equipment sales. Additionally, lower demand for compact construction products,
particularly in Europe, affected net sales in the current year. These decreases were partially offset by an increase in truck component
sales. Changes in foreign currency exchange rates negatively impacted net sales by approximately $27 million.
Gross profit for the year ended December 31, 2012 decreased $49.4 million when compared to 2011. Lower net sales decreased
gross profit by approximately $28 million. Additionally, higher inventory write downs and restructuring charges associated with
our Roadbuilding and compact construction businesses decreased gross profit by approximately $22 million.
SG&A costs for the year ended December 31, 2012 decreased $24.2 million when compared to 2011. The impact of cost reduction
actions taken in prior periods are reflected in lower current year SG&A costs. These positive impacts on SG&A costs for the
current year were partially offset by approximately $9 million higher asset impairment and restructuring related costs in the current
year associated with our Roadbuilding and compact construction businesses.
Loss from operations for the year ended December 31, 2012 increased $25.2 million when compared to 2011. The increased loss
was due to the items noted above, particularly approximately $31 million of charges associated with our Roadbuilding and compact
construction businesses, partially offset by lower SG&A costs.
Cranes
2012
2011
% of
Sales
($ amounts in millions)
% of
Sales
% Change In
Reported Amounts
Net sales
Gross profit
SG&A
Income from operations
$
$
$
$
1,491.9
317.4
174.0
143.4
—
21.3%
11.7%
9.6%
$
$
$
$
1,543.0
220.4
194.7
25.7
—
14.3%
12.6%
1.7%
(3.3)%
44.0 %
(10.6)%
458.0 %
Net sales for the Cranes segment for the year ended December 31, 2012 decreased by $51.1 million when compared to 2011.
Changes in foreign currency exchange rates negatively impacted net sales by approximately $67 million. Strong demand for rough
terrain cranes driven by energy related projects continued. We also experienced good demand for our cranes in North America,
South America, the Middle East and Australia. This strength was offset by softening demand for all-terrain cranes in Western
Europe.
42
Gross profit for the year ended December 31, 2012 increased by $97.0 million when compared to 2011. Improved price realization,
factory utilization, a favorable mix of product sales and higher parts volume in the current year improved gross profit by
approximately $85 million. Additionally, lower inventory, warranty and restructuring charges in the current year improved gross
profit by approximately $26 million. Changes in foreign currency exchange rates negatively impacted gross profit by approximately
$16 million.
SG&A costs for the year ended December 31, 2012 decreased $20.7 million when compared to 2011. The impact of cost reduction
actions taken in prior years are reflected in lower current year SG&A costs. The lower allocation of corporate expenses in the
current year decreased SG&A costs by approximately $10 million. Changes in foreign currency exchange rate changes also
positively impacted SG&A costs in the current year by approximately $11 million. Partially offsetting these positive impacts on
SG&A costs was approximately $12 million from the write down of an acquisition related note receivable in the current year.
Income from operations for the year ended December 31, 2012 increased $117.7 million when compared to 2011, resulting primarily
from improved price realization, a favorable mix of product sales and lower SG&A costs. However, changes in foreign currency
exchange rates negatively impacted income from operations by approximately $6 million.
Material Handling & Port Solutions
2012
2011
% of
Sales
($ amounts in millions)
—
$
1,077.3
22.1% $
21.4% $
0.7% $
142.8
207.5
(64.7)
% of
Sales
—
13.3 %
19.3 %
(6.0)%
$
$
$
$
1,840.3
406.9
393.5
13.4
% Change
In
Reported
Amounts
*
*
*
*
Net sales
Gross profit
SG&A
Income (loss) from operations
*
Not meaningful as a percentage
Net sales for the MHPS segment for the year ended December 31, 2012 increased by $763.0 million, primarily due to the addition
of the Demag Cranes AG acquisition. Excluding the effect of the addition of Demag Cranes AG in both years and the negative
impact of foreign currency exchange rate changes, net sales from the pre-existing businesses in the MHPS segment decreased
approximately 7% from the prior year.
Gross profit for the year ended December 31, 2012 increased by $264.1 million, primarily due to the addition of the Demag Cranes
AG acquisition. Excluding the effect of the addition of Demag Cranes AG, gross profit from the pre-existing businesses in the
MHPS segment improved approximately $17 million. The acquisition of Demag Cranes AG added approximately $248 million
to gross profit due to inclusion in our results for the full year in 2012. Additionally, approximately $41 million from inventory
revaluation charges related to the acquisition in the prior year did not recur in the current year. This was partially offset by
approximately $8 million of charges in the current year as the Material Handling business made changes to better align production
with market demand. Charges related to Brazilian post-employment benefit programs negatively impacted gross profit by
approximately $8 million in the current year.
SG&A costs for the year ended December 31, 2012 increased by $186.0 million when compared to 2011. The effect of the addition
from Demag Cranes AG as well as an allocation of Terex corporate costs to this segment in the current year were the primary
drivers of increased SG&A costs. The acquisition of Demag Cranes AG added approximately $212 million to SG&A costs due
to inclusion in our results for the full year in 2012. Charges related to Brazilian post-employment benefit programs negatively
impacted SG&A costs by approximately $2 million in the current year. SG&A costs in the pre-existing businesses in the MHPS
segment decreased approximately $27 million due to the impact of cost reduction actions taken in prior periods.
Income (loss) from operations for the year ended December 31, 2012 increased by $78.1 million when compared to 2011. These
results were primarily driven by the effect of the addition from Demag Cranes AG and inventory revaluation charges related to
the acquisition in the prior year which did not recur in the current year.
43
Materials Processing
2012
2011
% of
Sales
($ amounts in millions)
% of
Sales
% Change In
Reported Amounts
Net sales
Gross profit
SG&A
Income from operations
$
$
$
$
661.5
149.6
74.3
75.3
—
22.6%
11.2%
11.4%
$
$
$
$
682.8
135.8
76.3
59.5
—
19.9%
11.2%
8.7%
(3.1)%
10.2 %
(2.6)%
26.6 %
Net sales in the MP segment decreased by $21.3 million for the year ended December 31, 2012 when compared to 2011. Changes
in foreign currency exchange rates negatively impacted net sales by approximately $10 million. Soft demand in Europe was
partially offset by strong growth in the North American market. Expansion of our dealer network in Latin America helped offset
the loss of sales into the South African region where we lost a key regional dealer.
Gross profit for the year ended December 31, 2012 increased by $13.8 million when compared to 2011. The increase was partially
due to the impact of improved price realization and product sales mix, which contributed approximately $8 million to the increase
in gross profit. Additionally, lower restructuring charges in the current year and lower warranty costs in the current year increased
gross profit by approximately $6 million.
SG&A costs for the year ended December 31, 2012 decreased $2.0 million when compared to 2011. The decrease in SG&A costs
was primarily due to the release of a restructuring reserve due to revised operational plans for a facility previously scheduled for
closing.
Income from operations for the year ended December 31, 2012 improved $15.8 million when compared to 2011, primarily due to
improved price realization and lower warranty and restructuring charges in the current year.
Corporate/Eliminations
2012
2011
% of
Sales
($ amounts in millions)
% of
Sales
% Change In
Reported Amounts
Net sales
Loss from operations
$
$
(58.6)
(17.6)
—
30.0%
$
$
(54.1)
(7.2)
—
13.3%
(8.3)%
(144.4)%
The net sales amounts include the elimination of intercompany sales activity among segments. Loss from operations increased
from the prior year period primarily due to increased spending on developing markets.
Interest Expense, Net of Interest Income
During the year ended December 31, 2012, our interest expense net of interest income was $155.8 million, or $35.2 million higher
than the prior year. This increase was primarily driven by increased interest expense associated with the Demag Cranes AG
acquisition related debt.
Loss on Early Extinguishment of Debt
During the year ended December 31, 2012, we repaid the outstanding principal amount of our 10-7/8% Notes, our 8% Notes and
purchased approximately 25% of the principal amount outstanding of our 4% Convertible Notes due 2015. See Note M – “Long-
Term Obligations.” The $83.0 million loss on early extinguishment of debt in the Consolidated Statement of Income for the year
ended December 31, 2012 includes (a) cash payments of $77.3 million for call premiums and expenses associated with the
repayment of outstanding debt, (b) $21.7 million of non-cash charges for accelerated amortization of debt acquisition costs and
original issue discount associated with the debt extinguished, and (c) a $16.0 million gain related to the termination of the swap
agreement associated with the redemption of the 8% Notes, which are included in the calculation of net income. In preparing the
Consolidated Statement of Cash Flows, the non-cash item (b) was added to net income and the swap termination item (c) was
added to Loss on early extinguishment of debt, to reflect cash flow appropriately.
44
During the year ended December 31, 2011, we repaid the outstanding principal amount of our 7-3/8% Notes and entered into an
amended and restated credit agreement that replaced our previous credit agreement. The $7.7 million loss on early extinguishment
of debt in the Consolidated Statement of Income for the year ended December 31, 2011 includes (a) cash payments of $3.6 million
for call premiums associated with the repayment of outstanding debt, and (b) $4.1 million of non-cash charges for accelerated
amortization of debt acquisition costs, original issue discount and interest rate swap costs associated with the debt extinguished,
which are included in the calculation of net income. In preparing the Consolidated Statement of Cash Flows, the non-cash item
(b) was added to net income to reflect cash flow appropriately.
Other Income (Expense) — Net
Other income (expense) — net for the year ended December 31, 2012 was income of $5.4 million, a decrease of $134.3 million
when compared to income of $139.7 million in the prior year. The change was primarily driven by a gain in the prior year period
of approximately $168 million from the sale of shares in Bucyrus International. This was partially offset by approximately $16
million of charges in the prior year period related to the acquisition of Demag Crane AG.
Income Taxes
During the year ended December 31, 2012, we recognized income tax expense of $54.2 million on income of $155.6 million, an
effective tax rate of 34.8%, as compared to an income tax expense of $50.4 million on income of $84.5 million, an effective tax
rate of 59.6%, for the year ended December 31, 2011. The lower effective tax rate for the year ended December 31, 2012 was
primarily attributable to reductions in the provision for uncertain tax positions and losses for which no tax benefit was recognized.
Income (Loss) from Discontinued Operations
We had income from discontinued operations for the years ended December 31, 2012 and 2011, primarily due to resolution of
certain items associated with the results of the Mining business prior to divestiture.
Gain (Loss) on Disposition of Discontinued Operations
For the year ended December 31, 2012, we recognized a loss associated with settlement of claims related to the sale of the Mining
business offset in part by a gain recognized due to tax related adjustments on the net gain on divestiture of businesses sold in 2011.
For the year ended December 31, 2011, we recognized a gain due to tax related adjustments on the net gain on divestiture of
businesses sold in 2010.
2011 COMPARED WITH 2010
Terex Consolidated
2011
2010
Net sales
Gross profit
SG&A
Income (loss) from operations
$
$
$
$
6,504.6
960.3
879.1
81.2
* Not meaningful as a percentage
% of
Sales
($ amounts in millions)
—
14.8%
13.5%
1.2%
$
$
$
$
4,418.2
602.9
676.7
(73.8)
% of
Sales
% Change In
Reported Amounts
—
13.6 %
15.3 %
(1.7)%
47.2%
59.3%
29.9%
*
Net sales for the year ended December 31, 2011 increased $2,086.4 million when compared to the same period in 2010. Excluding
the effect of foreign currency exchange rate changes and the addition of the Demag Cranes acquisition, net sales increased
approximately 29% from the prior year period. Each of our segments experienced higher net sales compared to the same period
in 2010, primarily as a result of end market demand which has been showing signs of recovery, as well as our internal initiatives
to improve performance.
45
Gross profit for the year ended December 31, 2011 increased $357.4 million when compared to the same period in 2010. Higher
net sales, partially offset by higher input costs, contributed approximately $232 million to the increase. Excluding the effect of
foreign currency exchange rate changes and the Demag Cranes acquisition, gross profit increased approximately 36% from the
prior year period.
SG&A costs increased by $202.4 million when compared to the same period in 2010. The effect of foreign currency exchange
rate changes increased SG&A costs by approximately $24 million. Excluding the impact of the Demag Cranes acquisition and
foreign exchange effects, SG&A costs increased by approximately $47 million due to increased selling costs associated with higher
sales, higher marketing costs from certain trade show activities, increased engineering costs for new product development and
impairment charges related to manufacturing footprint rationalization.
Income (loss) from operations improved by $155.0 million for the year ended December 31, 2011 versus the comparable period
in 2010. Excluding the effect of foreign currency exchange rate changes and the Demag Cranes acquisition, income from operations
increased approximately $167 million. The increase was due to the items noted above, particularly improved net sales volume
offset partially by higher SG&A costs.
Aerial Work Platforms
2011
2010
% of
Sales
($ amounts in millions)
% of
Sales
% Change In
Reported Amounts
Net sales
Gross profit
SG&A
Income from operations
$
$
$
$
1,750.0
278.3
192.0
86.3
—
15.9%
11.0%
4.9%
$
$
$
$
1,076.3
147.7
144.9
2.8
—
13.7%
13.5%
0.3%
62.6%
88.4%
32.5%
*
* Not meaningful as a percentage
Net sales for the AWP segment for the year ended December 31, 2011 increased $673.7 million when compared to the same period
in 2010. Adjusting for the translation effect of foreign currency exchange rate changes, net sales increased approximately 60%
from the comparable prior year period. The North American market showed strong growth as the large rental companies continued
to replace the equipment in their fleets. The independent rental firms began to increase their purchases, but at a slower rate than
anticipated. Utilization rates of customer fleets remained high, a positive sign of the strength of the replacement cycle despite the
continuing soft market conditions in construction applications. Internationally, the demand for and acceptance of aerial work
platforms continued to expand steadily, also contributing to the increased sales versus the prior year period. Additionally, benefits
were beginning to be captured from price increases that were implemented late in the first half of 2011 in all geographies.
Gross profit for the year ended December 31, 2011 increased $130.6 million when compared to the same period in 2010. Increased
net sales, favorable product mix and higher production levels, partially offset by higher material costs, contributed approximately
$144 million to the improvement in gross profit. The favorable translation effect of foreign currency exchange rate changes
increased gross profit by approximately $4 million from the prior year period. These improvements were offset by approximately
$18 million in higher transactional foreign currency expenses, inventory charges and other costs of sales.
SG&A costs for the year ended December 31, 2011 increased $47.1 million when compared to the same period in 2010. The
higher allocation of corporate costs increased SG&A costs by approximately $15 million. Higher costs, primarily due to the
restoration and accrual for certain performance based compensation programs, engineering expenses and selling and marketing
expenses increased SG&A spending by approximately $32 million as compared to the prior year period.
Income from operations for the year ended December 31, 2011 improved $83.5 million when compared to the same period in
2010. The increase was due to the items noted above, particularly improved net sales, higher production levels and the favorable
effect of product mix, partially offset by higher SG&A costs, material costs and higher transactional foreign currency expenses.
46
Construction
2011
2010
% of
Sales
($ amounts in millions)
% of
Sales
% Change In
Reported Amounts
Net sales
Gross profit
SG&A
Loss from operations
$
$
$
$
1,505.6
163.1
181.5
(18.4)
—
10.8 %
12.1 %
(1.2)%
$
$
$
$
1,081.2
91.9
143.9
(52.0)
—
8.5 %
13.3 %
(4.8)%
39.3%
77.5%
26.1%
*
* Not meaningful as a percentage
Net sales in the Construction segment increased by $424.4 million for the year ended December 31, 2011 when compared to the
same period in 2010. Adjusting for the translation effect of foreign currency exchange rate changes, net sales increased
approximately 35% from the comparable prior year period. The improvement in net sales was driven by strong demand for backhoe
loaders in Russia, compact equipment in central Europe and trucks in developing markets including, Russia and South Africa.
Demand for material handlers continued to be strong especially in central Europe, the segment’s largest market for this type of
machinery. Slow demand for roadbuilding products in North America continued due to weak highway infrastructure spending.
The tightening in government sponsored financing programs constrained roadbuilding demand in Brazil.
Gross profit for the year ended December 31, 2011 increased $71.2 million when compared to the same period in 2010. Increased
net sales, offset partially by higher material costs, improved gross profit by approximately $42 million. Lower inventory write
downs and lower restructuring charges in the current year period improved gross profit by approximately $10 million. Lower
other costs of sales, particularly for distribution and other non-manufacturing costs improved gross profit by approximately $15
million.
SG&A costs for the year ended December 31, 2011 increased $37.6 million when compared to the same period in 2010. The
higher allocation of corporate costs increased SG&A costs by approximately $18 million. Additionally, higher selling and marketing
expenses associated with higher net sales and trade show activities increased SG&A costs by approximately $9 million. The
unfavorable translation effect of foreign currency exchange rate changes increased SG&A costs by approximately $6 million from
the prior year period.
Loss from operations for the year ended December 31, 2011 decreased $33.6 million when compared to the same period in 2010.
The improvement was due to the items noted above, particularly increased net sales partially offset by higher SG&A costs.
Cranes
2011
2010
% of
Sales
($ amounts in millions)
% of
Sales
% Change In
Reported Amounts
Net sales
Gross profit
SG&A
Income from operations
$
$
$
$
1,543.0
220.4
194.7
25.7
—
14.3%
12.6%
1.7%
$
$
$
$
1,419.2
232.1
177.5
54.6
—
16.4%
12.5%
3.8%
8.7 %
(5.0)%
9.7 %
(52.9)%
Net sales for the Cranes segment for the year ended December 31, 2011 increased by $123.8 million when compared to the same
period in 2010. Adjusting for the translation effect of foreign currency exchange rate changes, net sales increased approximately
3% from the comparable prior year period. Many of our crane categories experienced increased sales over the prior year, with
rough terrain cranes and pick and carry cranes being the largest contributors to the sales growth. Sales in the U.S. increased by
approximately 64% and the business experienced stronger demand in China, India and Germany. However, tower crane demand
was generally stagnant and the truck cranes business in China experienced a significant decrease in demand.
47
Gross profit for the year ended December 31, 2011 decreased by $11.7 million when compared to the same period in 2010. The
unfavorable effect of product sales mix and higher material costs negatively impacted gross profit by approximately $21 million.
Inventory write downs, primarily related to manufacturing footprint rationalization, decreased gross profit in the period by
approximately $7 million. These decreases in gross profit were partially offset by higher absorption of fixed manufacturing costs
of approximately $9 million when compared to the prior year period. Additionally, the decrease in gross profit was partially offset
by the favorable translation effect of foreign currency exchange rate changes, which increased gross profit by approximately $14
million from the prior year period.
SG&A costs for the year ended December 31, 2011 increased $17.2 million versus the same period in 2010. The higher allocation
of corporate costs increased SG&A costs by approximately $5 million. The unfavorable translation effect of foreign currency
exchange rate changes increased SG&A costs by approximately $9 million from the prior year period.
Income from operations for the year ended December 31, 2011 decreased $28.9 million versus the same period in 2010, resulting
primarily from the negative impact of higher material costs and the unfavorable effect of product sales mix.
Material Handling & Port Solutions
2011
2010
% of
Sales
($ amounts in millions)
—
$
13.3 % $
19.3 % $
(6.0)% $
364.4
36.4
57.5
(21.1)
% of
Sales
—
10.0 %
15.8 %
(5.8)%
$
$
$
$
1,077.3
142.8
207.5
(64.7)
% Change
In
Reported
Amounts
*
*
*
*
Net sales
Gross profit
SG&A
Loss from operations
* Not meaningful as a percentage
Net sales for the MHPS segment for the period ended December 31, 2011 was $1,077.3 million and increased by $712.9 million
when compared to the same period in 2010, primarily due to the impact of results from the Demag Cranes acquisition. Net sales
were driven by strength in Europe, particularly Germany. Increasing demand for industrial cranes as well as for mobile harbor
cranes positively impacted net sales in the period. Part sales were a meaningful contributor to net sales, as higher capacity utilization
at customer plants led to an increasing need for services and spare parts. Net sales from our Port Equipment Business increased
approximately $96 million in the current year compared to the prior year primarily due to an improved global economic environment.
Gross profit for the period ended December 31, 2011 was $142.8 million and increased by $106.4 million when compared to the
same period in 2010, primarily due to the impact of results from the Demag Cranes acquisition. These results included charges
of approximately $41 million related to the revaluation of inventory at the acquisition date of Demag Cranes AG and $9.7 million
related primarily to the incremental amortization of tangible and intangible assets. Gross profit in the Port Equipment Business
decreased approximately $6 million in the current year when compared with the prior year, primarily due to restructuring charges
related to manufacturing footprint rationalization.
SG&A costs for the period ended December 31, 2011 were $207.5 million and increased by $150.0 million when compared to the
same period in 2010, primarily due to the impact of results from the Demag Cranes acquisition. SG&A costs in the Port Equipment
Business increased approximately $19 million in the current year when compared with the prior year, primarily due to restructuring,
asset impairment and related charges associated with manufacturing footprint rationalization.
Loss from operations for the period ended December 31, 2011 was $64.7 million and increased by $43.6 million when compared
to the same period in 2010, primarily due to the impact of results from the Demag Cranes acquisition. These results included
charges of approximately $41 million related to the revaluation of inventory at the acquisition date of Demag Cranes AG and $11.3
million related primarily to the incremental amortization of tangible and intangible assets. Additionally, higher costs associated
with restructuring costs related to manufacturing footprint rationalization contributed to the larger loss.
48
Materials Processing
2011
2010
% of
Sales
($ amounts in millions)
% of
Sales
% Change In
Reported Amounts
Net sales
Gross profit
SG&A
Income (loss) from operations
$
$
$
$
682.8
135.8
76.3
59.5
—
19.9%
11.2%
8.7%
$
$
$
$
533.1
90.7
66.2
24.5
—
17.0%
12.4%
4.6%
28.1%
49.7%
15.3%
142.9%
* Not meaningful as a percentage
Net sales in the MP segment increased by $149.7 million for the year ended December 31, 2011 when compared to the same period
in 2010. Adjusting for the translation effect of foreign currency exchange rate changes, net sales increased approximately 24%
from the comparable prior year period. Machine and parts sales continued to increase in most markets with the exception of
southern Europe where customers have experienced difficulties in obtaining financing. New mobile machines with increased
capacities continued to drive sales as they gain acceptance in the market and approach capacities of static equipment. This increase
was slightly offset by a slowdown in net sales recently experienced in the crushing equipment market.
Gross profit for the year ended December 31, 2011 increased by $45.1 million when compared to the same period in 2010. The
increase was primarily due to the impact of increased net sales and favorable product sales mix, which increased gross profit by
approximately $38 million. The favorable translation effect of foreign currency exchange rate changes increased gross profit by
approximately $5 million from the prior year period.
SG&A costs for the year ended December 31, 2011 increased $10.1 million over the same period in 2010, primarily due to the
higher allocation of corporate costs of approximately $9 million and the unfavorable translation effect of foreign currency exchange
rate changes, which increased SG&A costs by approximately $3 million from the prior year period.
Income (loss) from operations for the year ended December 31, 2011 improved $35.0 million when compared to 2010, primarily
due to higher net sales volume partially offset by higher SG&A costs.
Corporate/Eliminations
2011
2010
% of
Sales
($ amounts in millions)
% of
Sales
% Change In
Reported Amounts
Net sales
Income (loss) from operations
$
$
(54.1)
(7.2)
—
13.3%
$
$
(56.0)
(82.6)
—
147.5%
3.4%
91.3%
The net sales amounts include the elimination of intercompany sales activity among segments. Loss from operations improved
from the prior year period primarily due to the impact of higher corporate expense allocation to all of the segments of approximately
$65 million combined with lower restructuring costs, cost reduction activities and improved margins from government sales and
other activities in the current year period.
Interest Expense, Net of Interest Income
During the year ended December 31, 2011, our interest expense net of interest income was $120.6 million, or $15.0 million lower
than the prior year. This decrease was primarily driven by reduced interest expense due to the retirement of debt over the past
year.
49
Loss on Early Extinguishment of Debt
On January 18, 2011, we exercised our early redemption option and repaid the outstanding $297.6 million principal amount of
our 7-3/8% Notes. The cash paid to redeem the 7-3/8% Notes included a call premium of $3.6 million. Additionally, we recorded
non-cash charges of $4.1 million for the write-off of unamortized costs, including debt issuance costs, original issue discount and
interest rate swap costs, in connection with the repayment of the 7-3/8% Notes. In August 2011, we entered into an amended and
restated credit agreement that replaced our previous credit agreement. The termination of our previous credit agreement resulted
in non-cash charges for accelerated amortization of debt acquisition costs of $1.4 million in the current year period.
Other Income (Expense) — Net
Other income (expense) — net for the year ended December 31, 2011 was income of $139.7 million, an increase of $159.3 million
when compared to expense of $19.6 million in the prior year. The change was primarily driven by income in the current year
period of approximately $168 million from the sale of approximately 5.8 million shares of Bucyrus common stock. Charges
related to the acquisition of Demag Cranes AG totaling approximately $16 million were partially offset by lower expense of
approximately $5 million in the current year period associated with derivative instruments.
Income Taxes
During the year ended December 31, 2011, we recognized income tax expense of $50.4 million on income of $84.5 million, an
effective rate of 59.6%, as compared to an income tax benefit of $26.8 million on a loss of $238.3 million, an effective rate of
11.2%, for the year ended December 31, 2010. The higher tax rate recorded in 2011, compared to statutory tax rates, was mainly
due to non-tax benefitted losses and non-tax deductible expenses incurred to acquire Demag Cranes AG and the enactment of a
statutory income tax rate reduction in the U.K., which caused a reduction in value in our U.K. deferred tax assets. The decrease
in the absolute amount of income (loss) from continuing operations before income taxes for the year ended December 31, 2011
compared to the year ended December 31, 2010 caused items of income tax expense and benefit for 2011 to have a more significant
impact than in 2010. When a loss from continuing operations before income tax (instead of income from continuing operations
before income tax) is reported, tax expense items decrease the effective tax rate and tax benefit items increase the effective tax
rate.
Income (Loss) from Discontinued Operations
We had income from discontinued operations for the year ended December 31, 2011 primarily due to tax related items associated
with the results of the Mining business prior to divestiture. In the year ended December 31, 2010, we had losses from discontinued
operations primarily due to the results of the Atlas business prior to divestiture.
Gain (Loss) on Disposition of Discontinued Operations
For the year ended December 31, 2011, we recognized a gain due to tax related adjustments on the net gain on divestiture of
businesses sold in 2010.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Changes
in the estimates and assumptions used by management could have significant impact on our financial results. Actual results could
differ from those estimates.
We believe that the following are among our most significant accounting policies which are important in determining the reporting
of transactions and events and which utilize estimates about the effect of matters that are inherently uncertain and therefore are
based on management judgment. Please refer to Note A – “Basis of Presentation” in the accompanying Consolidated Financial
Statements for a complete listing of our accounting policies.
50
Inventories – Inventories are stated at the lower of cost or market (“LCM”) value. Cost is determined principally by the average
cost method and the first-in, first-out (“FIFO”) method (approximately 57% and 43%, respectively). In valuing inventory, we are
required to make assumptions regarding the level of reserves required to value potentially obsolete or over-valued items at the
lower of cost or market. These assumptions require us to analyze the aging of and forecasted demand for our inventory, forecast
future products sales prices, pricing trends and margins, and to make judgments and estimates regarding obsolete or excess
inventory. Future product sales prices, pricing trends and margins are based on the best available information at that time including
actual orders received, negotiations with our customers for future orders, including their plans for expenditures, and market trends
for similar products. Our judgments and estimates for excess or obsolete inventory are based on analysis of actual and forecasted
usage. The valuation of used equipment taken in trade from customers requires us to use the best information available to determine
the value of the equipment to potential customers. This value is subject to change based on numerous conditions. Inventory
reserves are established taking into account age, frequency of use, or sale, and in the case of repair parts, the installed base of
machines. While calculations are made involving these factors, significant management judgment regarding expectations for
future events is involved. Future events that could significantly influence our judgment and related estimates include general
economic conditions in markets where our products are sold, new equipment price fluctuations, actions of our competitors, including
the introduction of new products and technological advances, as well as new products and design changes we introduce. We make
adjustments to our inventory reserve based on the identification of specific situations and increase our inventory reserves
accordingly. As further changes in future economic or industry conditions occur, we will revise the estimates that were used to
calculate its inventory reserves. At December 31, 2012, reserves for LCM, excess and obsolete inventory totaled $135.6 million.
If actual conditions are less favorable than those we have projected, we will increase our reserves for LCM, excess and obsolete
inventory accordingly. Any increase in our reserves will adversely impact our results of operations. The establishment of a reserve
for LCM, excess and obsolete inventory establishes a new cost basis in the inventory. Such reserves are not reduced until the
product is sold.
Accounts Receivable – We are required to judge our ability to collect accounts receivable from our customers. Valuation of
receivables includes evaluating customer payment histories, customer leverage, availability of third-party financing, political and
exchange risks and other factors. Many of these factors, including the assessment of a customer’s ability to pay, are influenced
by economic and market factors that cannot be predicted with certainty. At December 31, 2012, reserves for potentially uncollectible
accounts receivable totaled $38.8 million. Given current economic conditions, there can be no assurance that our historical accounts
receivable collection experience will be indicative of future results.
Guarantees – As of December 31, 2012, we have issued guarantees to financial institutions related to customer financing of
equipment purchases by our customers. We must assess the probability of losses or non-performance in ways similar to the
evaluation of accounts receivable, including consideration of a customer’s payment history, leverage, availability of third party
financing, political and exchange risks, and other factors. Many of these factors, including the assessment of a customer’s ability
to pay, are influenced by economic and market factors that cannot be predicted with certainty.
Our customers, from time to time, may fund acquisition of our equipment through third-party finance companies. In certain
instances, we may provide a credit guarantee to the finance company by which we agree to make payments to the finance company
should the customer default. Our maximum liability is limited to the remaining payments due to the finance company at the time
of default. In the event of customer default, we have generally been able to recover and dispose of the equipment at a minimum
loss, if any, to us.
As of December 31, 2012, our maximum exposure to such credit guarantees was $64.3 million, including total guarantees issued
by Terex Cranes Germany GmbH, part of the Cranes segment and Genie Holdings, Inc. and its affiliates (“Genie”), part of the
AWP segment; of $45.8 million and $9.7 million, respectively. The terms of these guarantees coincide with the financing arranged
by the customer and generally do not exceed five years. Given our position as the original equipment manufacturer and our
knowledge of end markets, when called upon to fulfill a guarantee, we have generally been able to liquidate the financed equipment
at a minimal loss, if any.
There can be no assurance that our historical credit default experience will be indicative of future results. Our ability to recover
losses experienced from our guarantees may be affected by economic conditions in effect at the time of loss.
We issue residual value guarantees under sales-type leases. A residual value guarantee involves a guarantee that a piece of equipment
will have a minimum fair market value at a future point in time. As described in Note Q – “Litigations and Contingencies” in the
Notes to the Consolidated Financial Statements, our maximum exposure related to residual value guarantees under sales-type
leases was $5.7 million at December 31, 2012. 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.
51
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. As of December 31, 2012, our maximum exposure pursuant to buyback guarantees
was $73.8 million, including total guarantees issued by Genie of $25.3 million and the MHPS segment of $43.6 million. 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.
We record a liability for the estimated fair value of guarantees issued pursuant to Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 460, “Guarantees” (“ASC 460”). We recognize a loss under a guarantee when our
obligation to make payment under the guarantee is probable and the amount of the loss can be estimated. A loss would be recognized
if our payment obligation under the guarantee exceeds the value we could expect to recover to offset such payment, primarily
through the sale of the equipment underlying the guarantee.
We have recorded an aggregate liability within Other current liabilities and Other non-current liabilities in the Consolidated Balance
Sheet of approximately $6 million for the estimated fair value of all guarantees provided as of December 31, 2012.
There can be no assurances that our historical experience in used equipment markets will be indicative of future results. Our
ability to recover losses experienced from our guarantees may be affected by economic conditions in the used equipment markets
at the time of loss.
Revenue Recognition – Revenue and related costs are generally recorded when products are shipped and invoiced to either
independently owned and operated dealers or to customers.
Revenue generated in the United States is recognized when title and risk of loss pass from us to our customers, which generally
occurs upon shipment depending upon the shipping terms negotiated. We also have a policy requiring that certain criteria be met
in order to recognize revenue, including satisfaction of the following requirements:
a) Persuasive evidence that an arrangement exists;
b) The price to the buyer is fixed or determinable;
c) Collectability is reasonably assured; and
d) We have no significant obligations for future performance.
In the United States, we have the ability to enter into a security agreement and receive a security interest in the product by filing
an appropriate Uniform Commercial Code (“UCC”) financing statement. However, a significant portion of our revenue is generated
outside of the United States. In many countries outside of the United States, as a matter of statutory law, a seller retains title to a
product until payment is made. The laws do not provide for a seller’s retention of a security interest in goods in the same manner
as established in the UCC. In these countries, we retain title to goods delivered to a customer until the customer makes payment
so that we can recover the goods in the event of customer default on payment. In these circumstances, where we only retain title
to secure our recovery in the event of customer default, we also have a policy, which requires meeting certain criteria in order to
recognize revenue, including satisfaction of the following requirements:
a) Persuasive evidence that an arrangement exists;
b) Delivery has occurred or services have been rendered;
c) The price to the buyer is fixed or determinable;
d) Collectability is reasonably assured;
e) We have no significant obligations for future performance; and
f) We are not entitled to direct the disposition of the goods, cannot rescind the transaction, cannot prohibit the customer
from moving, selling, or otherwise using the goods in the ordinary course of business and have no other rights of holding
title that rest with a titleholder of property that is subject to a lien under the UCC.
52
In circumstances where the sales transaction requires acceptance by the customer for items such as testing on site, installation,
trial period or performance criteria, revenue is not recognized unless the following criteria have been met:
a) Persuasive evidence that an arrangement exists;
b) Delivery has occurred or services have been rendered;
c) The price to the buyer is fixed or determinable;
d) Collectability is reasonably assured; and
e) The customer has given their acceptance, the time period for acceptance has elapsed or we have otherwise objectively
demonstrated that the criteria specified in the acceptance provisions have been satisfied.
In addition to performance commitments, we analyze factors such as the reason for the purchase to determine if revenue should
be recognized. This analysis is done before the product is shipped and includes the evaluation of factors that may affect the
conclusion related to the revenue recognition criteria as follows:
a) Persuasive evidence that an arrangement exists;
b) Delivery has occurred or services have been rendered;
c) The price to the buyer is fixed or determinable; and
d) Collectability is reasonably assured.
Revenue from sales-type leases is recognized at the inception of the lease. Income from operating leases is recognized ratably
over the term of the lease. We routinely sell equipment subject to operating leases and the related lease payments. If we do not
retain a substantial risk of ownership in the equipment, the transaction is recorded as a sale. If we do retain a substantial risk of
ownership, the transaction is recorded as a borrowing, the operating lease payments are recognized as revenue over the term of
the lease and the debt is amortized over a similar period.
We, from time to time, issue buyback guarantees in conjunction with certain sales agreements. These primarily relate to trade
value agreements (“TVAs”) in which a customer may trade in equipment in the future at a stated price/credit if the customer meets
certain conditions. The trade-in price/credit is determined at the time of the original sale of equipment. In conjunction with the
trade-in, these conditions include a requirement to purchase new equipment at fair market value at the time of trade-in, which fair
value is required to be of equal or greater value than the original equipment cost. Other conditions also include the general
functionality and state of repair of the machine. We have concluded that any credit provided to customers under a TVA/buyback
guarantee, which is expected to be equal to or less than the fair value of the equipment returned on the trade-in date, is a guarantee
to be accounted for in accordance with ASC 460.
The original sale of equipment, accompanied by a buyback guarantee, is a multiple element transaction wherein we offer our
customer the right, after some period of time, for a limited period of time, to exchange purchased equipment for a fixed price
trade-in credit toward another of our products. The fixed price trade-in credit is accounted for under the guidance provided by
ASC 460. Pursuant to this right, we have agreed to make a payment (in the form of a trade-in credit) to the customer contingent
upon the customer exercising its right to trade in the original purchased equipment. Under the guidance of ASC 460, we record
the fixed price trade-in credit at its fair value. Accordingly, as noted above, we have accounted for the trade-in credit as a separate
deliverable in a multiple element arrangement.
When a sales transaction includes multiple deliverables, such as sales of multiple products or sales of products and services that
are delivered over multiple reporting periods, the multiple deliverables are evaluated to determine the units of accounting, and the
entire fee from the arrangement is allocated to each unit of accounting based on the relative selling price. The selling price of a
unit of accounting is determined using a selling price hierarchy. Vendor-specific objective evidence (“VSOE”) is established based
upon the price charged for products and services that are sold separately in standalone transactions. If VSOE cannot be established,
third-party evidence (“TPE”) is evaluated based on competitor prices for similar deliverables when sold separately. If neither
VSOE or TPE is available, management's best estimate of selling price is established based upon the price at which we would sell
the product on a standalone basis taking into consideration factors including, but not limited to, internal costs, gross margin
objectives, pricing practices and market conditions. Revenue is recognized when the revenue recognition criteria for each unit of
accounting are met.
Goodwill – Goodwill, representing the difference between the total purchase price and the fair value of assets (tangible and
intangible) and liabilities at the date of acquisition, is reviewed for impairment annually, and more frequently as circumstances
warrant, and written down only in the period in which the recorded value of such assets exceed their fair value. We selected
October 1 as the date for our required annual impairment test.
53
Goodwill is tested for impairment at the reporting unit level, which is defined as an operating segment or a component of an
operating segment that constitutes a business for which discrete financial information with similar economic characteristics is
available and the operating results are regularly reviewed by our management. The AWP, Construction, Cranes and MP operating
segments plus the Material Handling business (including services) and Port Solutions business of MHPS, comprise the six reporting
units for goodwill impairment testing purposes.
The quantitative goodwill impairment analysis is a two-step process. The first step used to identify potential impairment involves
comparing each reporting unit’s estimated fair value to its carrying value, including goodwill. We use an income approach derived
from the discounted cash flow model to estimate the fair value of our reporting units. The aggregate fair value of our reporting
units is compared to our market capitalization on the valuation date to assess its reasonableness. The initial recognition of goodwill,
as well as the annual review of the carrying value of goodwill, requires that we develop estimates of future business performance.
These estimates are used to derive expected cash flow and include assumptions regarding future sales levels and the level of
working capital needed to support a given business. We rely on data developed by business segment management as well as
macroeconomic data in making these calculations. The discounted cash flow model also includes a determination of our weighted
average cost of capital. The cost of capital is based on assumptions about interest rates as well as a risk-adjusted rate of return
required by our equity investors. Changes in these estimates can impact the present value of the expected cash flow that is used
in determining the fair value of acquired intangible assets as well as the overall expected value of a given business.
The second step of the process involves the calculation of an implied fair value of goodwill for each reporting unit for which step
one indicated impairment. The implied fair value of goodwill is determined by measuring the excess of the estimated fair value
of the reporting unit over the estimated fair values of the individual assets, liabilities and identifiable intangibles as if the reporting
unit was being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill
assigned to the reporting unit, there is no impairment. If the carrying value of goodwill assigned to a reporting unit exceeds the
implied fair value of the goodwill, an impairment charge is recorded for the excess. An impairment loss cannot exceed the carrying
value of goodwill assigned to a reporting unit and subsequent reversal of goodwill impairment losses is not permitted.
We adopted FASB Accounting Standards Update (“ASU”) 2011-08, “Intangibles – Goodwill and Other (Topic 350),” (“ASU
2011-08”) at the beginning of the fourth quarter of 2011 on a prospective basis. See “Recent Accounting Pronouncements” below.
ASU 2011-08 allows us to first assess, qualitatively, whether it is necessary to perform the two-step goodwill impairment test. If
we believe, as a result of our qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than
its carrying amount, the quantitative two-step goodwill impairment test is required. We have the unconditional option to bypass
the qualitative assessment and proceed directly to performing the two-step goodwill impairment test.
There were no indicators of goodwill impairment in the tests performed as of October 1, 2012, 2011 and 2010. See Note J –
“Goodwill and Intangible Assets, Net” in the Notes to the Consolidated Financial Statements.
In order to evaluate the sensitivity of any quantitative fair value calculations on the goodwill impairment test, we applied a
hypothetical 10% decrease to the fair values of any reporting unit calculated. This hypothetical 10% decrease would still result
in excess fair value over carrying value for the reporting units as of October 1, 2012.
Impairment of Long-Lived Assets – Our policy is to assess the realizability of our long-lived assets, including intangible assets,
and to evaluate such assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such
assets (or group of assets) may not be recoverable. Impairment is determined to exist if fair value based on the estimated future
undiscounted cash flows are less than the asset’s carrying value. Future cash flow projections include assumptions regarding
future sales levels and the level of working capital needed to support each business. We use data developed by business segment
management as well as macroeconomic data in making these calculations. There are no assurances that future cash flow assumptions
will be achieved. The amount of any impairment then recognized would be calculated as the difference between the estimated
fair value and the carrying value of the asset. We recognized asset impairments of $8.9 million, $18.8 million and $11.4 million
for the years ended December 31, 2012, 2011 and 2010, respectively, of which $5.7 million, $8.8 million and $9.3 million,
respectively, was recognized as part of restructuring costs. See Note L – “Restructuring and Other Charges” in the Notes to the
Consolidated Financial Statements.
Accrued Warranties – We record accruals for unasserted warranty claims based on our claim experience. Warranty costs are
accrued at the time revenue is recognized. However, adjustments to the initial warranty accrual are recorded if actual claim
experience indicates that adjustments are necessary. These warranty costs are based upon management’s assessment of past claims
and current experience. However, actual claims could be higher or lower than amounts estimated, as the amount and value of
warranty claims are subject to variation as a result of many factors that cannot be predicted with certainty, including the performance
of new products, models and technology, changes in weather conditions for product operation, different uses for products and
other similar factors.
54
Accrued Product Liability – We record accruals for product liability claims when deemed probable and estimable based on facts
and circumstances and our prior claim experience. Accruals for product liability claims are valued based upon our prior claims
experience, including consideration of the jurisdiction, circumstances of the accident, type of loss or injury, identity of plaintiff,
other potential responsible parties, analysis of outside legal counsel, analysis of internal product liability counsel and the experience
of our product safety team. Actual product liability costs could be different due to a number of variables such as the decisions of
juries or judges.
Defined Benefit Plans – Pension benefits represent financial obligations that will be ultimately settled in the future with employees
who meet eligibility requirements. As of December 31, 2012, we maintained one qualified defined benefit pension plan and one
nonqualified plan covering certain U.S. employees. The benefits covering salaried employees are based primarily on years of
service and employees’ qualifying compensation during the final years of employment. The benefits covering bargaining unit
employees are based primarily on years of service and a flat dollar amount per year of service. Participation in the qualified plan
is frozen and participants are only credited with post-freeze service for purposes of determining vesting and retirement eligibility.
It is our policy, generally, to fund the qualified U.S. plan based on the requirements of the Employee Retirement Income Security
Act of 1974. See Note O – “Retirement Plans and Other Benefits” in the Notes to the Consolidated Financial Statements. The
nonqualified plan provides retirement benefits to certain senior executives of the Company and is unfunded. Generally, the
nonqualified plan provides a benefit based on average total compensation earned over a participant’s final five years of employment
and years of service reduced by benefits earned under any Company retirement program, excluding salary deferrals and matching
contributions. In addition, benefits are reduced by Social Security Primary Insurance Amounts attributable to Company
contributions. Participation in the nonqualified plan was frozen effective December 31, 2008; however, eligible participants are
credited with post-freeze service for purposes of determining vesting and the amount of benefits.
We maintain defined benefit plans in France, Germany, India, Switzerland and the United Kingdom (“U.K.”) for some of our
subsidiaries. The plans in France, Germany and India are unfunded plans. During 2010, the plan in the U.K. was frozen. For our
operations in Austria, Italy and Korea there are mandatory termination indemnity plans providing a benefit that is payable upon
termination of employment in substantially all cases of termination. We record this obligation based on the mandated requirements.
The measure of the current obligation is not dependent on the employees’ future service and therefore is measured at current value.
Plan assets consist primarily of common stocks, bonds and short-term cash equivalent funds. For the U.S. plan, approximately
34% of the assets are in equity securities and 66% are in fixed income securities. For the non-U.S. funded plans, approximately
11% of the assets are in equity securities, 87% are in fixed income securities and 2% are in real estate investment securities. These
allocations are reviewed periodically and updated to meet the long-term goals of the plans.
Determination of defined benefit pension and postretirement plan obligations and their associated expenses requires the use of
actuarial valuations to estimate the benefits that employees earn while working, as well as the present value of those benefits. We
use the services of independent actuaries to assist with these calculations. Inherent in these valuations are economic assumptions,
including expected returns on plan assets, discount rates at which liabilities may be settled, rates of increase of health care costs,
rates of future compensation increases as well as employee demographic assumptions such as retirement patterns, mortality and
turnover. The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions,
higher or lower turnover rates, or longer or shorter life spans of participants. Actual results that differ from the actuarial assumptions
used are recorded as unrecognized gains and losses. Unrecognized gains and losses that exceed 10% of the greater of the plan’s
projected benefit obligations or the market-related value of assets are amortized to earnings over the shorter of the estimated future
service period of the plan participants or the period until any anticipated final plan settlements. The assumptions used in the
actuarial models are evaluated periodically and are updated to reflect experience. We believe the assumptions used in the actuarial
calculations are reasonable and are within accepted practices in each of the respective geographic locations in which we operate.
Expected long-term rates of return on pension plan assets were 7.50% for the U.S. plan, 6.00% for the U.K. plan and 3.50% for
the Swiss plan at December 31, 2012. Our strategy with regard to the investments in the pension plans is to earn a rate of return
sufficient to match or exceed the long-term growth of pension liabilities. The expected rate of return of plan assets represents an
estimate of long-term returns on the investment portfolio. These rates are determined annually by management based on a weighted
average of current and historical market trends, historical portfolio performance and the portfolio mix of investments. The expected
long-term rate of return on plan assets at December 31 is used to measure the earnings effects for the subsequent year. The
difference between the expected return and the actual return on plan assets affects the calculated value of plan assets and, ultimately,
future pension expense (income).
55
The discount rates for pension plan liabilities were 3.75% for U.S. plan and 1.75% to 10.25% with a weighted average of 3.39%
for non-U.S. plans at December 31, 2012. The discount rate enables us to estimate the present value of expected future cash flows
on the measurement date. The rate used reflects a rate of return on high-quality fixed income investments that match the duration
of expected benefit payments at the December 31 measurement date. The discount rate at December 31 is used to measure the
year-end benefit obligations and the earnings effects on the subsequent year. Typically, a higher discount rate decreases the present
value of benefit obligations and increases pension expense.
The expected rates of compensation increase for our non-U.S. pension plans were 0.00% to 9.00% with a weighted average of
1.67% at December 31, 2012. These estimated annual compensation increases are determined by management every year and are
based on historical trends and market indices.
We have recorded the underfunded status on our balance sheet as a liability and the unrecognized prior service costs and actuarial
gains (losses) as an adjustment to Stockholders’ equity on the Consolidated Balance Sheet. The change in assumptions from the
previous year, primarily decreases in the discount rate, resulted in a net increase in the projected benefit obligation of $86.8 million.
Actual results in any given year will often differ from actuarial assumptions because of demographic, economic and other factors.
The market value of plan assets can change significantly in a relatively short period of time. Additionally, the measurement of
plan benefit obligations is sensitive to changes in interest rates. As a result, if the equity market declines and/or interest rates
decrease, the plans’ estimated benefit obligations could increase, causing an increase in liabilities and a reduction in Stockholders’
Equity.
We expect that any future obligations under our plans that are not currently funded will be funded from future cash flows from
operations. If our contributions are insufficient to adequately fund the plans to cover our future obligations, or if the performance
of the assets in our plans does not meet expectations, or if our assumptions are modified, contributions could be higher than
expected, which would reduce cash available for our business. Changes in U.S. or foreign laws governing these plans could require
additional contributions. In addition, changes in generally accepted accounting principles in the U.S. could require recording
additional liabilities and costs related to these plans.
Assumptions used in computing our net pension expense and projected benefit obligation have a significant effect on the amounts
reported. A 0.25% change in each assumption below would have the following effects upon net pension expense and projected
benefit obligation, respectively, as of and for the year ended December 31, 2012:
U. S. Plan:
Net pension expense
Projected benefit obligation
Non-U.S. Plans:
Net pension expense
Projected benefit obligation
Increase
Decrease
Discount Rate
Expected long-
term rate of return
Discount Rate
Expected long-
term rate of return
($ amounts in millions)
$
$
$
$
(0.2)
(5.3)
—
(18.8)
$
$
$
$
(0.3)
—
(0.1)
—
$
$
$
$
0.2
5.6
—
20.1
$
$
$
$
0.3
—
0.1
—
Income Taxes – We estimate income taxes based on enacted tax laws in the various jurisdictions where we conduct business. We
recognize deferred income tax assets and liabilities, which represent future tax benefits or obligations of our legal entities. These
deferred income tax balances arise from temporary differences due to divergent treatment of certain items for accounting and
income tax purposes.
We evaluate our deferred tax assets each period to ensure that estimated future taxable income will be sufficient in character,
amount and timing to result in the use of our deferred tax assets. “Character” refers to the type (ordinary income versus capital
gain) as well as the source (foreign vs. domestic) of the income we generate. “Timing” refers to the period in which future income
is expected to be generated. Timing is important because, in certain jurisdictions, net operating losses (“NOLs”) and other tax
attributes expire if not used within an established statutory time frame. Based on these evaluations, we have determined that it is
more likely than not that expected future earnings will be sufficient to use most of our deferred tax assets.
56
We do not provide for income taxes or tax benefits on the differences between financial reporting basis and tax basis of our non-
U.S. subsidiaries where such differences are reinvested and, in our opinion, will continue to be indefinitely reinvested. If earnings
of foreign subsidiaries are not considered indefinitely reinvested, deferred U.S. income taxes, foreign income taxes, and foreign
withholding taxes may have to be provided. We do not record deferred income taxes on the temporary difference between the
book and tax basis in domestic subsidiaries where permissible. At this time, determination of the unrecognized deferred tax
liabilities for temporary differences related to the investment in subsidiaries is not practical.
Judgments and estimates are required to determine tax expense and deferred tax valuation allowances and in assessing uncertain
tax positions. Tax returns are subject to audit and local taxing authorities could challenge tax-filing positions we take. Our practice
is to file income tax returns that conform to the requirements of each jurisdiction and to record provisions for tax liabilities,
including interest and penalties, in accordance with ASC 740, “Income Taxes.” As our business has grown in geographic scope,
size and complexity, so has our potential exposure to uncertain tax positions. Given the subjective nature of applicable tax laws,
the results of an audit of some of our tax returns could have a significant impact on our financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” which amended ASC 820, “Fair Value Measurements and
Disclosures.” This guidance addresses efforts to achieve convergence between U.S. GAAP and International Financial Reporting
Standards (“IFRS”) requirements for measurement of and disclosures about fair value. Key provisions of the amendment include:
a prohibition on grouping financial instruments for purposes of determining fair value, except when an entity manages market and
credit risks on the basis of the entity’s net exposure to the group; an extension of the prohibition against the use of a blockage
factor to all fair value measurements (that prohibition currently applies only to financial instruments with quoted prices in active
markets); and a requirement that for recurring Level 3 fair value measurements, entities disclose quantitative information about
unobservable inputs, a description of the valuation process used and qualitative details about the sensitivity of the measurements.
In addition, for items not carried at fair value but for which fair value is disclosed, entities will be required to disclose the level
within the fair value hierarchy that applies to the fair value measurement disclosed. This guidance was effective for us in our
interim and annual reporting periods beginning January 1, 2012. Adoption of this guidance did not have a significant impact on
the determination or reporting of our financial results.
In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive
Income,” (“ASU 2011-05”) which amended previous comprehensive income guidance. This accounting update eliminates the
option to present components of other comprehensive income as part of the statement of stockholders’ equity. Instead, we must
report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net
income and other comprehensive income, or in two separate but consecutive statements. In December 2011, the FASB issued
ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated
Other Comprehensive Income in ASU 2011-05,” (“ASU 2011-12”). ASU 2011-12 defers the requirement that companies present
reclassification adjustments for each component of accumulated other comprehensive income in both net income and other
comprehensive income on the face of the financial statements. ASU 2011-05 and 2011-12 were effective for us on January 1,
2012. Since the provisions of ASU 2011-05 and 2011-12 are presentation related only, adoption of ASU 2011-05 and 2011-12
did not have a significant impact on the determination or reporting of our financial results.
In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and
Liabilities,” (“ASU 2011-11”). ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements
to enable users of its financial statements to understand the effect of those arrangements on its financial position. ASU 2011-11
is effective for annual and interim reporting periods beginning on or after January 1, 2013. Adoption of this guidance is not
expected to have a significant impact on the determination or reporting of our financial results.
In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible
Assets for Impairment,” (“ASU 2012-02”). ASU 2012-02 amends the guidance in ASC 350-30 on testing indefinite-lived intangible
assets, other than goodwill, for impairment. Under ASU 2012-02, an entity has the option of performing a qualitative assessment
of whether it is more likely than not that the fair value of an entity's indefinite-lived intangible asset is less than its carrying amount
before calculating the fair value of the asset. If the conclusion is that it is more likely than not that the fair value of an indefinite-
lived intangible asset is less than its carrying amount we would be required to calculate the fair value of the asset. ASU 2012-02
is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early
adoption permitted. Adoption of this guidance is not expected to have a significant impact on the determination or reporting of
our financial results.
57
In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income,” (“ASU 2013-02”). ASU 2013-02 adds new disclosure requirements for items reclassified out of accumulated other
comprehensive income (“AOCI”). ASU 2013-02 intends to help us improve the transparency of changes in other comprehensive
income (“OCI”) and items reclassified out of AOCI in our financial statements. ASU 2013-02 does not amend any existing
requirements for reporting net income or OCI in our financial statements. ASU 2013-02 is effective for annual and interim reporting
periods beginning after December 15, 2012. Adoption of this guidance is not expected to have a significant impact on the
determination or reporting of our financial results.
LIQUIDITY AND CAPITAL RESOURCES
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 $678.0 million at December 31, 2012. 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 our internal operating initiatives and meet our operating and debt service requirements. See Item
1A “Risk Factors” for a detailed description of the risks resulting from our debt and our ability to generate sufficient cash flow to
operate our business.
In August 2011, we entered into an amended and restated credit agreement that replaced our previous credit agreement. We further
amended that credit agreement in October 2012. See Note M – “Long-Term Obligations.” The credit agreement provided us with
a $460.1 million term loan and a €200.0 million term loan that we used, along with other cash, to pay for the shares of Demag
Cranes AG and all related fees and expenses. The term loans are scheduled to mature on April 28, 2017.
In addition, our credit facilities provide us with a revolving line of credit of up to $500 million. The revolving line of credit consists
of $250 million of available domestic revolving loans and $250 million of available multicurrency revolving loans. The revolving
lines of credit are scheduled to mature on April 29, 2016. We had $454.6 million available for borrowing under our revolving
credit facilities at December 31, 2012. The 2011 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.
On March 16, 2012 the Demag Cranes AG shareholders approved the Domination and Profit and Loss Transfer Agreement
(“DPLA”) we entered into with Demag Cranes AG in January 2012. The DPLA became effective following registration of the
DPLA in the commercial register on April 18, 2012. Upon demand from outside shareholders of Demag Cranes AG, we will
acquire their shares in return for €45.52 per share, or up to approximately €174 million in the aggregate. Any outside shareholders
of Demag Cranes AG that choose not to sell their shares to us will receive an annual guaranteed payment in the gross amount of
€3.33 per share (€3.04 net per share). For further information on the time period for outside shareholders of Demag Cranes AG
to tender their shares, see Note P – “Stockholders Equity” in our Consolidated Financial Statements. As of December 31, 2012,
approximately 61 thousand shares have been tendered and we have paid approximately €2.8 million for these tendered shares.
Following the effectiveness of the DPLA the lenders under the Demag Cranes Credit Agreement exercised their option to terminate
the agreement. We repaid all €135 million debt outstanding on May 11, 2012 and provided bank guarantees or cash collateral to
backstop any letters of credit outstanding under the facility by May 21, 2012. The facility was terminated on May 21, 2012.
On March 27, 2012, we sold and issued $300 million aggregate principal amount of Senior Notes due 2020 (“6-1/2% Notes”) at
par which yielded approximately $295 million of net proceeds after underwriting discounts, commissions and expenses. We used
the net proceeds of this offering for general corporate purposes, including cash requirements resulting from the effectiveness of
the DPLA.
58
In the third quarter of 2012, we purchased approximately 25% of the principal amount outstanding of our 4% Convertible Notes
due 2015 for approximately $64 million, including $0.3 million of accrued interest. These purchases reduced the balance of the
Convertible Notes outstanding by $36.1 million, resulting in a loss on early retirement of debt of $6.5 million and a reduction in
equity of $19.1 million.
In September of 2012, we repaid $299.9 million principal amount outstanding of our 10-7/8% Senior Notes. Total cash paid to
redeem the 10-7/8% Senior Notes was $347.3 million which included a make whole call premium of 12.265% as calculated under
the indenture for the 10-7/8% Senior Notes, totaling $36.8 million plus accrued interest of $10.6 million. This transaction resulted
in a loss on early extinguishment of debt of $42.9 million.
In November 2012, we sold and issued $850 million aggregate principal of Senior Notes due 2021 (“6% Notes”) at par which
yielded approximately $836 million of net proceeds after underwriting discounts, commissions and expenses. We used the net
proceeds from this offering plus other cash to redeem all $800 million principal amount of our outstanding 8% Notes. Total cash
paid to redeem the 8% Notes was $837.3 million and included tender/call premiums of $34.6 million and accrued interest of $2.7
million. These transactions resulted in a loss on early extinguishment of debt of $28.7 million.
We increased our investment in financial services assets from approximately $126 million, net at December 31, 2011, to
approximately $150 million, net at December 31, 2012. We remain focused on expanding TFS in key markets like the U.S., Europe
and China; however, for the near future, we expect to rely to a greater extent on third-party funders.
During 2012, our cash used in inventory was approximately $55 million. We are continuing to share, throughout our Company,
best practices and lean manufacturing processes that several of our business units have implemented successfully. We expect
these initiatives to reduce the level of inventory needed to support our business and allow us to reduce our manufacturing lead
times, thereby reducing our working capital requirements. Working capital as percent of trailing three month annualized net sales
was 27.2% at December 31, 2012. We have changed the definition of working capital to include advance payments as we negotiate
these receipts to fund inventory for products with long lead times. We expect the ratio of working capital to trailing three months
annualized sales to be approximately 21% at the end of 2013.
The following tables show the calculation of our working capital and trailing three months annualized sales as of December 31,
2012 (in millions):
Net Sales
Trailing Three Month Annualized Net Sales
Inventories
Trade Receivables
Less: Trade Accounts Payable
Less: Customer advances
Total Working Capital
Three
months
ended
12/31/12
$ 1,695.5
4
$ 6,782.0
x
As of
12/31/12
$ 1,715.6
1,077.7
(635.5)
(312.9)
$ 1,844.9
We are continuing to focus on generating cash, including increasing prices for our products, reducing costs and working capital,
reviewing alternatives for under-utilized assets, and selectively investing in our businesses to promote growth in 2013. We generated
approximately $554 million in free cash flow in 2012, which was in line with our expectations. Additionally, similar to 2012, we
expect to generate more than $500 million in free cash flow during 2013.
59
The following table reconciles income from operations to free cash flow (in millions):
Income from operations $
Plus: Depreciation and amortization
Plus: Non-cash note receivable write down
Plus: Proceeds from sale of assets
Plus/minus: Cash changes in working capital
Plus/minus: Customer advances
Less: Capital expenditures
Free cash flow $
Year ended
12/31/12
398.6
153.0
12.3
34.6
(58.8)
97.1
(82.5)
554.3
Our ability to generate cash from operations is subject to numerous factors, including the following:
• Many of our customers fund their purchases through third-party finance companies that extend credit based on the credit-
worthiness of the customers and the expected residual value of our equipment. Changes either in the customers’ credit
profile or used equipment values may affect the ability of customers to purchase equipment. There can be no assurance
that third-party finance companies will continue to extend credit to our customers as they have in the past.
• As our sales change, the absolute amount of working capital needed to support our business may change.
• Our suppliers extend payment terms to us based on our overall credit rating. Declines in our credit rating may influence
•
suppliers’ willingness to extend terms and in turn increase the cash requirements of our business.
Sales of our products are subject to general economic conditions, weather, competition, the translation effect of foreign
currency exchange rate changes, and other factors that in many cases are outside our direct control. For example, during
periods of economic uncertainty, our customers have delayed purchasing decisions, which reduces cash generated from
operations.
For certain products, primarily port equipment and process cranes, we negotiate, when possible, advance payments from our
customers for products with long lead times to help fund the substantial working capital investment in these products.
Typically, we have invested our cash in a combination of highly rated, liquid money market funds and in short-term bank deposits
with large, highly rated banks. Our investment objective is to preserve capital and liquidity while earning a market rate of interest.
In 2011 and 2012, we used a portion of our cash balance to take advantage of early payment discounts offered by our suppliers
where the returns were greater than the amount that would have been earned on such cash if invested in money market funds and
short-term bank deposits. We expect to continue this practice in 2013, although we may discontinue it at any time.
Interest rates charged under our bank credit facilities are subject to adjustment based on our consolidated leverage ratio. We had
no outstanding borrowings under our revolving credit facilities and $710.1 million in U.S. dollar and Euro denominated term loans
outstanding at December 31, 2012. The U.S. dollar term loans bear interest at a rate of London Interbank Offer Rate (“LIBOR”)
plus 3.5%, with a floor of 1.0% on LIBOR. The Euro term loans bear interest at a rate of Euro Interbank Offer Rate (“EURIBOR”)
plus 4.0%, with a floor of 1.0% on EURIBOR. At December 31, 2012, the weighted average interest rate on these term loans was
4.68%.
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 2011 credit facility expires in April 2016. Our 4% Convertible Senior Subordinated Notes
mature in June 2015, our 6-1/2% Senior Notes mature April 1, 2020 and our 6% Senior Notes mature May 15, 2021. See Note
M – “Long-Term Obligations,” in our Consolidated Financial Statements.
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. In November 2012, we filed an automatic shelf registration
statement with the SEC to allow for easier access to the capital markets. Our ability to access the capital markets is also subject
to our timely filing of periodic reports with the 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.
60
Cash Flows
Cash provided by operations for the year ended December 31, 2012 totaled $292.3 million, compared to cash provided by operations
of $22.7 million for the year ended December 31, 2011. The change in cash from operations was primarily driven by improvements
in profitability and reduced working capital usage in the year ended December 31, 2012 as compared to the prior year. These net
improvements were partially offset by approximately $124 million in tax payments in the year ended December 31, 2012 related
to the gain on the sale of the former mining business and receipt of an approximately $105 million tax refund in the year ended
December 31, 2011.
Cash used in investing activities for the year ended December 31, 2012 was $76.3 million, compared to $592.5 million cash used
in investing activities for the year ended December 31, 2011. The change in cash from investing activities was primarily due to
proceeds from the sale of Bucyrus International shares in the prior year offset by the purchase of Demag Cranes AG in the prior
year.
Cash used in financing activities was $323.3 million for the year ended December 31, 2012, compared to cash provided by financing
activities for the year ended December 31, 2011 of $450.6 million. The change was primarily due to net cash used in the current
year period for repayments of the 10-7/8% Notes, repayment of the Demag Cranes AG credit facility, purchase of approximately
25% of the 4% Convertible Notes and repayment of the 8% Notes, partially offset by the issuance of the 6-1/2% and 6% Notes.
This compared to net proceeds from the issuance of term debt under our credit facilities to purchase Demag Cranes AG, partially
offset by repayment of the 7-3/8% Notes in the prior year.
Contractual Obligations
The following table sets out our specified contractual obligations at December 31, 2012 (in millions):
Total
< 1 year
1-3 years
3-5 years
> 5 years
Payments due by period
Long-term debt obligations
$
2,844.9
$
203.8
$
395.7
$
632.4
$
1,613.0
Capital lease obligations
Operating lease obligations
Purchase obligations (1)
6.2
271.1
898.9
1.0
62.2
758.8
1.6
94.3
39.3
1.0
55.2
44.0
2.6
59.4
56.8
Total
$
4,021.1
$
1,025.8
$
530.9
$
732.6
$
1,731.8
(1) Purchase obligations include non-cancellable and cancellable commitments. In many cases, cancellable commitments contain penalty
provisions for cancellation.
Long-term debt obligations include expected interest expense. Interest expense is calculated using fixed interest rates for
indebtedness that has fixed rates and the implied forward rates as of December 31, 2012 for indebtedness that has floating interest
rates.
As of December 31, 2012, our liability for uncertain income tax positions was $141.7 million. With respect to our tax audits
worldwide, it is reasonably possible that we will make payments in 2013 of up to $36 million. Payments may be made in part to
mitigate the accrual of interest in connection with income tax audit assessments that may be issued and that we would contest, or
may in part be made to settle the matter with the tax authorities. Due to the high degree of uncertainty regarding the timing of
potential future cash flows associated with the remaining liabilities, we are unable to make a reasonable estimate of the amount
and period in which these remaining liabilities might be paid.
Additionally, at December 31, 2012, we had outstanding letters of credit that totaled $324.0 million and had issued $64.3 million
in credit guarantees of customer financing to purchase equipment, $5.7 million in residual value guarantees and $73.8 million in
buyback guarantees.
We maintain defined benefit pension plans for some of our operations in the United States and Europe. It is our policy to fund
the retirement plans at the minimum level required by applicable regulations. In 2012, we made cash contributions and payments
to the retirement plans of $30.1 million, and we estimate that our retirement plan contributions will be approximately $24 million
in 2013. Changes in market conditions, changes in our funding levels or actions by governmental agencies may result in accelerated
funding requirements in future periods.
61
OFF-BALANCE SHEET ARRANGEMENTS
Guarantees
Our customers, from time to time, fund the acquisition of our equipment through third-party finance companies. In certain instances,
we may provide a credit guarantee to the finance company by which we agree to make payments to the finance company should
the customer default. Our maximum liability is generally limited to our customer’s remaining payments due to the finance company
at the time of default. In the event of a customer default, we are generally able to recover and dispose of the equipment at a
minimum loss, if any, to us.
As of December 31, 2012, our maximum exposure to such credit guarantees was $64.3 million, including total credit guarantees
issued by Terex Cranes Germany GmbH, part of our Cranes segment, and Genie, part of our AWP segment, of $45.8 million and
$9.7 million, respectively. The terms of these guarantees coincide with the financing arranged by the customer and generally do
not exceed five years. Given our position as the original equipment manufacturer and our knowledge of end markets, when called
upon to fulfill a guarantee, we have generally been able to liquidate the financed equipment at a minimal loss, if any.
There can be no assurance that historical credit default experience will be indicative of future results. Our ability to recover losses
from our guarantees may be affected by economic conditions in effect at the time of loss.
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. As described in Note Q – “Litigations and
Contingencies” in the Notes to the Consolidated Financial Statements, our maximum exposure related to residual value guarantees
under sales-type leases was $5.7 million at December 31, 2012. 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. As of December 31, 2012, our maximum exposure pursuant to buyback guarantees
was $73.8 million. 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.
We have recorded an aggregate liability within Other current liabilities and Other non-current liabilities in the Consolidated Balance
Sheet of approximately $6 million for the estimated fair value of all guarantees provided as of December 31, 2012.
There can be no assurance that our historical experience in used equipment markets will be indicative of future results. Our ability
to recover losses from our guarantees may be affected by economic conditions in the used equipment markets at the time of loss.
CONTINGENCIES AND UNCERTAINTIES
Foreign Currencies and Interest Rate Risk
Our products are sold in over 100 countries around the world and, accordingly, our revenues are generated in foreign currencies,
while the costs associated with those revenues are only partly incurred in the same currencies. The major foreign currencies,
among others, in which we do business are the Euro, Australian Dollar and British Pound. We may, from time to time, hedge
specifically identified committed and forecasted cash flows in foreign currencies using forward currency sale or purchase contracts.
At December 31, 2012, we had foreign exchange contracts with a notional value of $579.0 million.
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.
62
Certain of our obligations, including our senior subordinated notes, bear interest at a fixed interest rate. In November 2007, we
entered into an interest rate swap agreement to convert $400 million of the principal amount of our 8% Notes to floating rates. In
November 2012, this agreement was terminated and we received approximately $16 million upon termination. This amount was
recorded as a gain on early extinguishment of debt in connection with the repayment of the 8% Notes. In a prior year, we entered
into an interest rate agreement to convert a fixed rate to a floating rate with respect to $200 million of the principal amount of our
7-3/8% Notes. To maintain an appropriate balance between floating and fixed rate obligations on our mix of debt, we exited this
interest rate swap agreement on January 15, 2007 and paid $5.4 million. We recorded this loss as an adjustment to the carrying
value of the hedged debt and amortized it through January 18, 2011, when we repaid the outstanding portion of the 7-3/8% Notes.
Other
We are subject to a number of contingencies and uncertainties including, without limitation, product liability claims, intellectual
property claims, self-insurance obligations, tax examinations, guarantees, class action lawsuits and the matters described above
in Item 3 – “Legal Proceedings.” 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.
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 have
reduced lost time injuries in the workplace since 2007 and we continue to work toward a world-class level of safety practices in
our industry.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks that exist as part of our ongoing business operations and we use derivative financial
instruments, where appropriate, to manage these risks. As a matter of policy, we do not engage in trading or speculative transactions.
For further information on accounting policies related to derivative financial instruments, refer to Note K – “Derivative Financial
Instruments” in our Consolidated Financial Statements.
Foreign Exchange Risk
We are exposed to fluctuations in foreign currency cash flows related to third-party purchases and sales, intercompany product
shipments and intercompany loans. We are also exposed to fluctuations in the value of foreign currency investments in subsidiaries
and cash flows related to repatriation of these investments. Additionally, we are exposed to volatility in the translation of foreign
currency earnings to U.S. Dollars. Primary exposures include the U.S. Dollar when compared to functional currencies of our
major markets, which include the Euro, Australian Dollar and British Pound. We assess foreign currency risk based on transactional
cash flows, identify naturally offsetting positions and purchase hedging instruments to partially offset anticipated exposures. At
December 31, 2012, we had foreign exchange contracts with a notional value of $579.0 million. The fair market value of these
arrangements, which represents the cost to settle these contracts, was a net loss of $0.4 million at December 31, 2012.
At December 31, 2012, we performed a sensitivity analysis on the impact that aggregate changes in the translation effect of foreign
currency exchange rate changes would have on our operating income. Based on this sensitivity analysis, we have determined that
a change in the value of the U.S. dollar relative to currencies outside the U.S. by 10% to amounts already incorporated in the
financial statements for the year ended December 31, 2012 would have had an approximately $18 million impact on the translation
effect of foreign currency exchange rate changes already included in our reported operating income for the period.
63
Interest Rate Risk
We are exposed to interest rate volatility with regard to future issuances of fixed rate debt and existing issuances of variable rate
debt. Primary exposure includes movements in the U.S. prime rate, LIBOR and EURIBOR. We manage interest rate risk by
incurring a mix of indebtedness bearing interest at both floating and fixed rates at inception and maintain an ongoing balance
between floating and fixed rates on this mix of indebtedness using interest rate swaps when necessary. At December 31, 2012,
approximately 40% of our debt was floating rate debt and the weighted average interest rate for all debt was approximately 5.80%.
Certain of our obligations bear interest at a fixed interest rate. In November 2007, we entered into an interest rate agreement to
convert $400 million of the principal amount of our 8% Notes to floating rates. In November 2012, this agreement was terminated
and we received $16 million upon termination. This amount was recorded as a gain on early extinguishment of debt in connection
with the repayment of the 8% Notes. In a prior year, we entered into an interest rate agreement to convert a fixed rate to a floating
rate with respect to $200 million of the principal amount of our 7-3/8% Notes. To maintain an appropriate balance between floating
and fixed rate obligations on our mix of debt, we exited this interest rate swap agreement on January 15, 2007 and paid $5.4
million. We recorded this loss as an adjustment to the carrying value of the hedged debt and amortized it through January 15,
2011, which was the effective date that the hedged debt was extinguished.
At December 31, 2012, we performed a sensitivity analysis for our derivatives and other financial instruments that have interest
rate risk. We calculated the pretax earnings effect on our interest sensitive instruments. Based on this sensitivity analysis, we
have determined that an increase of 10% in our average floating interest rates at December 31, 2012 would have increased interest
expense by approximately $4 million for the year ended December 31, 2012.
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 2012,
input cost increases in tires and certain purchased components were generally offset by reductions in steel prices and competitive
sourcing activities. We did incur some net material cost increases as a result of legislation (primarily Tier 4 emission standards)
and performance based changes in certain product areas, particularly engines.
In the absence of labor strikes or other unusual circumstances, substantially all materials and components are normally available
from multiple suppliers. However, certain of our businesses receive materials and components from a single source supplier,
although alternative suppliers of such materials may be generally available. Current and potential suppliers are evaluated regularly
on their ability to meet our requirements and standards. We actively manage our material supply sourcing, and employ various
methods to limit risk associated with commodity cost fluctuations and availability. The inability of suppliers, especially any single
source suppliers for a particular business, to deliver materials and components promptly could result in production delays and
increased costs to manufacture our products. We have designed and implemented plans to mitigate the impact of these risks by
using alternate suppliers, expanding our supply base globally, leveraging our overall purchasing volumes to obtain favorable
quantities and developing a closer working relationship with key suppliers. We are focusing on gaining efficiencies with suppliers
based on our global purchasing power and resources.
64
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of our independent registered public accounting firm and our Consolidated Financial Statements and Financial Statement
Schedule are filed pursuant to this Item 8 and are included later in this report. See Index to Consolidated Financial Statements
and Financial Statement Schedule on page F-1.
Unaudited Quarterly Financial Data
Summarized quarterly financial data for 2012 and 2011 are as follows (in millions, except per share amounts):
Net sales
Gross profit
Net income (loss) from continuing operations
attributable to common stockholders
Income (loss) from discontinued operations – net of
tax
Gain (loss) on disposition of discontinued
operations – net of tax
Net income (loss) attributable to Terex Corporation
Per share:
Basic
Net income (loss) from continuing operations
attributable to common stockholders
Income (loss) from discontinued operations –
net of tax
Gain (loss) on disposition of discontinued
operations – net of tax
Net income (loss) attributable to Terex
Corporation
Diluted
Net income (loss) from continuing operations
attributable to common stockholders
Income (loss) from discontinued operations –
net of tax
Gain (loss) on disposition of discontinued
operations – net of tax
Net income (loss) attributable to Terex
Corporation
2012
2011
Fourth
Third
Second
First
Fourth
Third
Second
First
$ 1,695.5
$ 1,822.0
$ 2,011.5
$ 1,819.4
$ 1,956.6
$ 1,803.6
$ 1,488.2
$ 1,256.2
307.6
378.6
428.6
330.8
302.6
275.6
214.9
167.2
(30.7)
30.2
(0.7)
(1.9)
(33.3)
—
—
30.2
83.6
—
2.3
85.9
20.5
2.5
—
23.0
(4.2)
36.9
—
1.3
(2.9)
—
—
36.9
0.9
(0.6)
(0.8)
(0.5)
5.0
6.4
0.3
11.7
$
(0.28)
$
0.27
$
0.76
$
0.19
$
(0.04)
$
0.34
$
0.01
$
0.05
—
(0.02)
—
—
(0.30)
0.27
—
0.02
0.78
0.02
—
—
0.01
—
—
—
(0.01)
0.21
(0.03)
0.34
—
0.06
—
0.11
$
(0.28)
$
0.27
$
0.75
$
0.18
$
(0.04)
$
0.33
$
0.01
$
0.04
—
(0.02)
—
—
(0.30)
0.27
—
0.02
0.77
0.02
—
—
0.01
—
—
—
(0.01)
0.20
(0.03)
0.33
—
0.06
—
0.10
The accompanying unaudited quarterly financial data has been prepared in accordance with generally accepted accounting
principles in the United States for interim financial information and with Item 302 of Regulation S-K. In our opinion, all adjustments
considered necessary for a fair statement have been made and were of a normal recurring nature.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
65
ITEM 9A.
CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports
we file under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated
to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow
timely decisions regarding required financial disclosure. In connection with the preparation of this Annual Report on Form 10-
K, our management carried out an evaluation, under the supervision and with the participation of our management, including the
CEO and CFO, as of December 31, 2012, of the effectiveness of the design and operation of our disclosure controls and procedures,
as such term is defined under Rule 13a-15(e) under the Exchange Act. Based upon this evaluation, our CEO and CFO concluded
that our disclosure controls and procedures were effective as of December 31, 2012.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company,
as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external reporting purposes in accordance with generally accepted accounting principles. Internal control over
financial reporting includes those policies and procedures that: pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;
and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our
assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management has conducted an assessment, including testing, of the effectiveness of our internal control over financial reporting
as of December 31, 2012. In making its assessment of internal control over financial reporting, management used the criteria
in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, the Company’s management has concluded that, as of December 31, 2012, the Company’s internal
control over financial reporting was effective.
The effectiveness of our internal control over financial reporting as of December 31, 2012 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in this
Annual Report on Form 10-K.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during our quarter ended December 31, 2012, that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
During 2012, we implemented an integrated suite of enterprise software at several businesses as part of a multi-year global
implementation program. The implementation has involved changes to certain processes and related internal controls over financial
reporting. We have reviewed the system and the controls affected and made appropriate changes as necessary.
The effectiveness of any system of controls and procedures is subject to certain limitations, and, as a result, there can be no
assurance that our controls and procedures will detect all errors or fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be attained.
ITEM 9B.
OTHER INFORMATION
None.
66
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 is incorporated by reference to the definitive Terex Corporation Proxy Statement to be filed
with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual Report
on Form 10-K.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference to the definitive Terex Corporation Proxy Statement to be filed
with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual Report
on Form 10-K.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Equity Compensation Plan Information
The following table summarizes information about the Company’s equity compensation plans as of December 31, 2012:
Plan Category
Equity compensation plans approved by stockholders
Equity compensation plans not approved by stockholders
Total
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights (a)
Weighted average exercise
price of outstanding options,
warrants and rights (b)
519,224 (1)
—
519,224
$23.00
—
$23.00
Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column (a)) (c)
2,537,890
—
2,537,890
(1) This does not include 3,272,719 of restricted stock awards, which are also not included in the calculation of the weighted average exercise
price of outstanding options, warrants and rights in column (b) of this table.
The other information required by Item 12 is incorporated by reference to the definitive Terex Corporation Proxy Statement to be
filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual
Report on Form 10-K.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by Item 13 is incorporated by reference to the definitive Terex Corporation Proxy Statement to be filed
with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual Report
on Form 10-K.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is incorporated by reference to the definitive Terex Corporation Proxy Statement to be filed
with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual Report
on Form 10-K.
67
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) and (2) Financial Statements and Financial Statement Schedules.
See “Index to Consolidated Financial Statements and Financial Statement Schedule” on Page F-1.
(3) Exhibits
See “Exhibit Index” on Page E-1.
68
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
TEREX CORPORATION
By:
/s/ Ronald M. DeFeo
February 27, 2013
Ronald M. DeFeo
Chairman, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
NAME
/s/ Ronald M. DeFeo
Ronald M. DeFeo
/s/ Phillip C. Widman
Phillip C. Widman
/s/ Mark I. Clair
Mark I. Clair
/s/ G. Chris Andersen
G. Chris Andersen
/s/ Paula H. J. Cholmondeley
Paula H. J. Cholmondeley
/s/ Don DeFosset
Don DeFosset
/s/ Thomas J. Hansen
Thomas J. Hansen
/s/ Raimund Klinkner
Raimund Klinkner
/s/ David A. Sachs
David A. Sachs
/s/ Oren G. Shaffer
Oren G. Shaffer
/s/ David C. Wang
David C. Wang
/s/ Scott W. Wine
Scott W. Wine
TITLE
Chairman, Chief Executive Officer,
and Director
(Principal Executive Officer)
Senior Vice President and Chief Financial
Officer
(Principal Financial Officer)
Vice President, Controller and Chief
Accounting Officer
(Principal Accounting Officer)
DATE
February 27, 2013
February 27, 2013
February 27, 2013
Lead Director
February 27, 2013
February 27, 2013
February 27, 2013
February 27, 2013
February 27, 2013
February 27, 2013
February 27, 2013
February 27, 2013
February 27, 2013
Director
Director
Director
Director
Director
Director
Director
Director
69
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NEXT PAGE IS NUMBERED “E-1”
70
EXHIBIT INDEX
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4
4.5
4.6
10.1
10.2
10.3
10.4
10.5
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).
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).
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).
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).
Amended and Restated Bylaws of Terex Corporation (incorporated by reference to Exhibit 3.1 of the Form 8-K Current
Report, Commission File No. 1-10702, dated December 8, 2011 and filed with the Commission on December 13,
2011).
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).
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).
Second Supplemental Indenture, dated June 3, 2009, between Terex Corporation and HSBC Bank USA, National
Association relating to 4% Convertible Senior Subordinated Notes Due 2015 (incorporated by reference to Exhibit
4.2 of the Form 8-K Current Report, Commission File No. 1-10702, dated June 3, 2009 and filed with the Commission
on June 8, 2009).
Supplemental Indenture, dated as of February 7, 2011, to the Second Supplemental Indenture dated as of June 3, 2009
to the Subordinated Debt Indenture dated as of July 20, 2007, with HSBC Bank USA, National Association as Trustee
relating to the 4% Convertible Senior Subordinated Notes due 2015 (incorporated by reference to Exhibit 4.3 of the
Form 8-K Current Report, Commission File No. 1-10702, dated February 7, 2011 and filed with the Commission on
February 10, 2011).
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).
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).
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). ***
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). ***
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). ***
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). ***
Terex Corporation Amended and Restated 2000 Incentive Plan (incorporated by reference to Exhibit 10.3 of the Form
8-K Current Report, Commission File No. 1-10702, dated October 14, 2008 and filed with the Commission on October
17, 2008). ***
E-1
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
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). ***
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). ***
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). ***
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). ***
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). ***
Terex Corporation 2005 Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 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). ***
Amendment to the Terex Corporation 2005 Deferred Compensation Plan (incorporated by reference to Exhibit 10.2
of the Form 8-K Current Report, Commission File No. 1-10702, dated December 12, 2008 and filed with the
Commission on December 16, 2008). ***
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 12, 2011 and filed with the Commission
on May 17, 2011). ***
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. ***
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. ***
Amended and Restated Credit Agreement dated as of August 5, 2011, 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 5, 2011 and filed with the Commission August 10, 2011).
Amendment No. 1, dated as of October 12, 2012, to the Amended and Restated Credit Agreement dated as of August
5, 2011, 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 October 12, 2012 and filed with the Commission October 15, 2012.
Guarantee and Collateral Agreement dated as of August 11, 2011, among Terex Corporation, certain of its subsidiaries,
and Credit Suisse AG, as Collateral Agent (incorporated by reference to Exhibit 10.1 of the Form 8-K Current Report,
Commission File No. 1-10702, dated August 11, 2011 and filed with the Commission August 16, 2011).
Underwriting Agreement, dated March 22, 2012, among Terex Corporation and Credit Suisse Securities (USA) LLC,
Goldman, Sachs & Co., RBS Securities Inc. and UBS Securities LLC, as representatives for the several underwriters
named therein (incorporated by reference to Exhibit 1.1 of the Form 8-K Current Report, Commission File No.
1-10702, dated March 22, 2012 and filed with the Commission March 27, 2012).
Underwriting Agreement, dated November 8, 2012, among Terex Corporation and Credit Suisse Securities (USA)
LLC, Goldman, Sachs & Co., RBS Securities Inc. and UBS Securities LLC, as representatives for the several
underwriters named therein (incorporated by reference to Exhibit 1.1 of the Form 8-K Current Report, Commission
File No. 1-10702, dated November 7, 2012 and filed with the Commission November 13, 2012).
Business Combination Agreement dated June 16, 2011, among Terex Corporation, Terex Industrial Holding AG and
Demag Cranes AG (incorporated by reference to Exhibit 10.1 of the Form 8-K Current Report, Commission File No.
1-10702, dated June 16, 2011 and filed with the Commission on June 21, 2011).
E-2
10.22
10.23
10.24
10.25
10.26
12
21.1
23.1
24.1
31.1
31.2
32
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).
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).
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).
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).
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).
Calculation of Ratio of Earnings to Fixed Charges. *
Subsidiaries of Terex Corporation. *
Consent of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP, Stamford,
Connecticut. *
Power of Attorney. *
Chief Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a). *
Chief Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a). *
Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes –Oxley Act of 2002. **
101.INS XBRL Instance Document. *
101.SCH XBRL Taxonomy Extension Schema Document. *
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. *
101.DEF XBRL Taxonomy Extension Definition Linkbase Document. *
101.LAB XBRL Taxonomy Extension Label Linkbase Document. *
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. *
*
**
***
Exhibit filed with this document.
Exhibit furnished with this document.
Denotes a management contract or compensatory plan or arrangement.
E-3
TEREX CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
TEREX CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2012 AND 2011
AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED December 31, 2012
Report of Independent Registered Public Accounting Firm
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Stockholders’ Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULE
Schedule II – Valuation and Qualifying Accounts and Reserves
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-61
All other schedules for which provision is made in the applicable regulations of the Securities and Exchange Commission are not
required under the related instructions, or are not applicable, and therefore have been omitted.
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
and Stockholders of Terex Corporation
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the
financial position of Terex Corporation and its subsidiaries at December 31, 2012 and 2011, and the results of their operations and
their cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is
responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual
Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these
financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on
our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/PricewaterhouseCoopers LLP
Stamford, Connecticut
February 27, 2013
F-2
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Income (loss) from operations
Other income (expense)
Interest income
Interest expense
Loss on early extinguishment of debt
Amortization of debt issuance costs
Other income (expense) – net
Income (loss) from continuing operations before income taxes
(Provision for) benefit from income taxes
Income (loss) from continuing operations
Income (loss) from discontinued operations – net of tax
Gain (loss) on disposition of discontinued operations – net of tax
Net income (loss)
Net loss (income) attributable to noncontrolling interest
Net income (loss) attributable to Terex Corporation
Amounts attributable to Terex Corporation common stockholders:
Income (loss) from continuing operations
Income (loss) from discontinued operations – net of tax
Gain (loss) on disposition of discontinued operations – net of tax
Net income (loss) attributable to Terex Corporation
Basic Earnings (Loss) per Share Attributable to Terex Corporation Common Stockholders:
Income (loss) from continuing operations
Income (loss) from discontinued operations – net of tax
Gain (loss) on disposition of discontinued operations – net of tax
Net income (loss) attributable to Terex Corporation
Diluted Earnings (Loss) per Share Attributable to Terex Corporation Common Stockholders:
Income (loss) from continuing operations
Income (loss) from discontinued operations – net of tax
Gain (loss) on disposition of discontinued operations – net of tax
Net income (loss) attributable to Terex Corporation
Weighted average number of shares outstanding in per share calculation
Basic
Diluted
$
$
$
$
$
$
$
$
$
Year Ended
December 31,
2011
6,504.6
(5,544.3)
960.3
(879.1)
81.2
2012
7,348.4
(5,902.8)
1,445.6
(1,047.0)
398.6
8.8
(164.6)
(83.0)
(9.6)
5.4
155.6
(54.2)
101.4
1.8
0.4
103.6
2.2
105.8
103.6
1.8
0.4
105.8
0.94
0.02
—
$
$
$
$
0.96
$
$
0.91
0.02
—
0.93
$
14.3
(134.9)
(7.7)
(8.1)
139.7
84.5
(50.4)
34.1
5.8
0.8
40.7
4.5
45.2
38.6
5.8
0.8
45.2
0.35
0.05
0.01
0.41
0.35
0.05
0.01
0.41
110.3
113.9
109.5
110.7
$
$
$
$
$
$
$
$
2010
4,418.2
(3,815.3)
602.9
(676.7)
(73.8)
9.8
(145.4)
(1.4)
(7.9)
(19.6)
(238.3)
26.8
(211.5)
(15.3)
589.3
362.5
(4.0)
358.5
(215.5)
(15.3)
589.3
358.5
(1.98)
(0.14)
5.42
3.30
(1.98)
(0.14)
5.42
3.30
108.7
108.7
The accompanying notes are an integral part of these consolidated financial statements.
F-3
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
Net income (loss)
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment, net of (provision for) benefit from taxes of $(5.1), $0.6
and $8.3 respectively
Derivative hedging adjustment, net of (provision for) benefit from taxes of $(2.5), $0.8 and
$(0.5), respectively
Debt and equity securities adjustment, net of (provision for) benefit from taxes of $(0.5),
$55.6 and $(55.7), respectively
Pension liability adjustment:
Net gain (loss), net of (provision for) benefit from taxes of $22.5, $11.8 and $(2.4),
respectively
Amortization of actuarial (gain) loss, net of provision for (benefit from) taxes of $(1.6),
$(1.3) and $(0.9), respectively
Foreign exchange and other effects, net of (provision for) benefit from taxes of $1.1,
$(0.2) and $(8.5), respectively
Total pension liability adjustment
Other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive loss (income) attributable to noncontrolling interest
Year Ended December 31,
2012
2011
2010
$
103.6 $
40.7 $
362.5
54.2
(101.9)
(65.8)
3.2
1.0
(1.5)
1.5
(99.9)
100.8
(57.8)
(26.6)
4.1
(2.8)
(56.5)
1.9
105.5
1.7
2.3
0.8
(23.5)
(226.8)
(186.1)
5.4
5.6
2.3
20.1
28.0
64.5
427.0
(4.1)
Comprehensive income (loss) attributable to Terex Corporation
$
107.2 $
(180.7) $
422.9
The accompanying notes are an integral part of these consolidated financial statements.
F-4
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions, except par value)
Assets
Current assets
Cash and cash equivalents
Trade receivables (net of allowance of $38.8 and $42.5 at December 31, 2012 and 2011,
respectively)
Inventories
Other current assets
Total current assets
Non-current assets
Property, plant and equipment – net
Goodwill
Intangible assets – net
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable and current portion of long-term debt
Trade accounts payable
Accrued compensation and benefits
Accrued warranties and product liability
Customer advances
Income taxes payable
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term debt, less current portion
Retirement plans
Other non-current liabilities
Total liabilities
Commitments and contingencies
Redeemable noncontrolling interest
Stockholders’ equity
Common stock, $.01 par value – authorized 300.0 shares; issued 122.9 and 121.9 shares at
December 31, 2012 and 2011, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive (loss) income
Less cost of shares of common stock in treasury – 13.0 and 13.1 shares at December 31, 2012 and
2011, respectively
Total Terex Corporation stockholders’ equity
Noncontrolling interest
Total stockholders’ equity
Total liabilities, redeemable noncontrolling interest and stockholders’ equity
December 31,
2012
2011
$
678.0
$
774.1
$
$
1,077.7
1,715.6
326.1
3,797.4
813.3
1,245.3
474.4
415.8
6,746.2
83.8
635.5
226.2
97.6
312.9
83.5
269.3
1,708.8
2,014.9
430.7
313.6
4,468.0
1,178.1
1,758.1
342.9
4,053.2
835.5
1,232.9
519.5
422.3
7,063.4
77.0
764.6
222.3
111.0
223.2
185.2
307.6
1,890.9
2,223.4
344.6
416.1
4,875.0
246.9
—
1.2
1,260.7
1,467.7
(124.1)
(597.8)
2,007.7
23.6
2,031.3
6,746.2
$
1.2
1,271.8
1,361.9
(125.5)
(599.1)
1,910.3
278.1
2,188.4
7,063.4
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-5
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(in millions)
Outstanding
Shares
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Common
Stock in
Treasury
Non-
controlling
Interest
Total
Balance at December 31, 2009
107.3
$
Net Income (Loss)
Other Comprehensive Income (Loss) – net
of tax:
Issuance of Common Stock
Compensation under Stock-based Plans –
net
Acquisition
Divestiture
Purchase of noncontrolling interest
Distributions to noncontrolling interest
Acquisition of Treasury Stock
Balance at December 31, 2010
Net Income (Loss)
Other Comprehensive Income (Loss) – net
of tax:
Issuance of Common Stock
Compensation under Stock-based Plans –
net
Acquisition
Purchase of noncontrolling interest
Distributions to noncontrolling interest
Acquisition of Treasury Stock
Balance at December 31, 2011
Net Income (Loss)
Other Comprehensive Income (Loss) – net
of tax:
Issuance of Common Stock
Compensation under Stock-based Plans –
net
Acquisition
Divestiture
Redeemable noncontrolling interest
Purchase of noncontrolling interest
Distributions to noncontrolling interest
Redemption of convertible debt
Acquisition of Treasury Stock
—
—
0.8
0.1
—
—
—
—
(0.1)
108.1
—
—
0.7
0.1
—
—
—
(0.1)
108.8
—
—
1.0
0.2
—
—
—
—
—
—
(0.1)
1.2
—
—
—
—
—
—
—
—
—
1.2
—
—
—
—
—
—
—
—
1.2
—
—
—
—
—
—
—
—
—
—
—
$
1,253.5
$
958.2
$
36.0
$
(598.7) $
24.2
$ 1,674.4
—
—
27.5
(3.8)
—
—
(13.0)
—
—
358.5
—
—
—
—
—
—
—
—
1,264.2
1,316.7
—
—
26.5
(13.7)
—
(5.2)
—
—
1,271.8
—
—
13.5
7.3
—
—
(12.5)
(0.3)
—
(19.1)
—
45.2
—
—
—
—
—
—
—
1,361.9
105.8
—
—
—
—
—
—
—
—
—
—
—
64.4
—
—
—
—
—
—
—
100.4
—
(225.9)
—
—
—
—
—
—
—
—
—
1.9
—
—
—
—
(2.5)
(599.3)
—
—
—
2.6
—
—
—
(2.4)
4.0
0.1
—
—
7.5
(3.6)
(0.6)
(3.4)
—
28.2
(4.5)
362.5
64.5
27.5
(1.9)
7.5
(3.6)
(13.6)
(3.4)
(2.5)
2,111.4
40.7
(0.9)
(226.8)
—
—
258.3
(1.3)
(1.7)
—
26.5
(11.1)
258.3
(6.5)
(1.7)
(2.4)
(125.5)
(599.1)
278.1
2,188.4
—
1.4
—
—
—
—
—
—
—
—
—
—
—
—
5.1
—
—
—
—
—
—
(3.8)
(2.2)
103.6
0.5
—
—
2.1
1.9
13.5
12.4
2.1
(7.4)
(7.4)
(247.5)
(260.0)
0.3
(0.3)
—
—
—
(0.3)
(19.1)
(3.8)
Balance at December 31, 2012
109.9
$
1.2
$
1,260.7
$ 1,467.7
$
(124.1) $
(597.8) $
23.6
$ 2,031.3
The accompanying notes are an integral part of these financial statements.
F-6
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
OPERATING ACTIVITIES OF CONTINUING OPERATIONS
Net income (loss)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating
activities:
Discontinued operations
Depreciation and amortization
Deferred taxes
Gain on sale of assets
Loss on early extinguishment of debt
Stock-based compensation expense
Other non-cash charges
Changes in operating assets and liabilities (net of effects of acquisitions and
divestitures):
Trade receivables
Inventories
Trade accounts payable
Income taxes payable / receivable
Customer advances
Other assets and liabilities
Other operating activities, net
Net cash provided by (used in) operating activities of continuing operations
INVESTING ACTIVITIES OF CONTINUING OPERATIONS
Capital expenditures
Acquisition of businesses, net of cash acquired
Other investments
Proceeds from disposition of discontinued operations
Investments in derivative securities
Proceeds from sale of assets
Other investing activities, net
Net cash (used in) provided by investing activities of continuing operations
FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Repayments of debt
Proceeds from issuance of debt
Payment of debt issuance costs
Purchase of noncontrolling interest
Distributions to noncontrolling interest
Other financing activities, net
Net cash provided by (used in) financing activities of continuing operations
CASH FLOWS FROM DISCONTINUED OPERATIONS
Net cash (used in) provided by operating activities of discontinued operations
Net cash provided by (used in) investing activities of discontinued operations
Net cash used in discontinued operations
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period
Year Ended December 31,
2012
2011
2010
$
103.6
$
40.7
$
362.5
(2.2)
153.0
(25.2)
(5.9)
99.0
29.1
70.1
122.5
(55.0)
(126.3)
(108.7)
97.1
(67.7)
8.9
292.3
(82.5)
(3.4)
(24.1)
3.5
—
34.6
(4.4)
(76.3)
(1,533.0)
1,234.3
(20.7)
(3.5)
(4.9)
4.5
(323.3)
—
—
—
11.2
(96.1)
774.1
(6.6)
126.6
(2.0)
(173.5)
7.7
23.4
92.3
(181.2)
(26.1)
64.6
74.4
18.6
(74.9)
38.7
22.7
(79.1)
(1,035.2)
—
0.5
(16.1)
539.6
(2.2)
(592.5)
(447.8)
926.7
(26.6)
(6.3)
—
4.6
450.6
—
—
—
(0.9)
(120.1)
894.2
$
678.0
$
774.1
$
(574.0)
104.8
108.0
(3.3)
1.4
34.9
100.4
(215.1)
(194.2)
36.1
(143.6)
(32.5)
(181.1)
(14.4)
(610.1)
(55.0)
(12.8)
(19.3)
1,002.0
(21.1)
10.0
—
903.8
(365.5)
73.9
(7.8)
(12.9)
(3.4)
—
(315.7)
(53.1)
0.1
(53.0)
(2.0)
(77.0)
971.2
894.2
The accompanying notes are an integral part of these consolidated financial statements.
F-7
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012
(dollar amounts in millions, unless otherwise noted, except per share amounts)
NOTE A – BASIS OF PRESENTATION
Principles of Consolidation. The Consolidated Financial Statements include the accounts of Terex Corporation and its majority-
owned subsidiaries (“Terex” or the “Company”). The Company consolidates all majority-owned and controlled subsidiaries,
applies the equity method of accounting for investments in which the Company is able to exercise significant influence, and applies
the cost method for all other investments. All material intercompany balances, transactions and profits have been eliminated.
On August 16, 2011, the Company acquired a majority interest in the shares of Demag Cranes AG. The results of Demag Cranes
AG and its consolidated subsidiaries (“Demag Cranes AG”) are included within the Material Handling & Port Solutions (“MHPS”)
segment since the date of acquisition. See Note I – “Acquisitions.”
Reclassification. Certain prior year amounts have been reclassified to conform to the current year’s presentation. Effective July
1, 2012, the Company realigned certain operations, which were formerly included in the Cranes segment, to provide a single
source for serving port equipment customers and are now included in the MHPS segment. See Note B – “Business Segment
Information.” The Company has changed the presentation of certain items in its Consolidated Statement of Cash Flows. Certain
borrowings and repayments of debt have been reported on a gross basis; these cash flows were reported on a net basis previously.
The Company believes that these changes provide a clearer presentation of the Company’s cash flows.
Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual amounts could differ from those estimates.
Cash and Cash Equivalents. Cash equivalents consist of highly liquid investments with original maturities of three months or
less. The carrying amount of cash and cash equivalents approximates their fair value. Cash and cash equivalents at December 31,
2012 and 2011 include $12.4 million and $14.2 million, respectively, which were not immediately available for use. These consist
primarily of cash balances held in escrow to secure various obligations of the Company.
Inventories. Inventories are stated at the lower of cost or market (“LCM”) value. Cost is determined principally by the average
cost method and the first-in, first-out (“FIFO”) (approximately 57% and 43% , respectively). In valuing inventory, the Company
is required to make assumptions regarding the level of reserves required to value potentially obsolete or over-valued items at the
lower of cost or market. These assumptions require the Company to analyze the aging of and forecasted demand for its inventory,
forecast future products sales prices, pricing trends and margins, and to make judgments and estimates regarding obsolete or excess
inventory. Future product sales prices, pricing trends and margins are based on the best available information at that time including
actual orders received, negotiations with the Company’s customers for future orders, including their plans for expenditures, and
market trends for similar products. The Company’s judgments and estimates for excess or obsolete inventory are based on analysis
of actual and forecasted usage. The valuation of used equipment taken in trade from customers requires the Company to use the
best information available to determine the value of the equipment to potential customers. This value is subject to change based
on numerous conditions. Inventory reserves are established taking into account age, frequency of use, or sale, and in the case of
repair parts, the installed base of machines. While calculations are made involving these factors, significant management judgment
regarding expectations for future events is involved. Future events that could significantly influence the Company’s judgment
and related estimates include general economic conditions in markets where the Company’s products are sold, new equipment
price fluctuations, actions of the Company’s competitors, including the introduction of new products and technological advances,
as well as new products and design changes the Company introduces. The Company makes adjustments to its inventory reserve
based on the identification of specific situations and increases its inventory reserves accordingly. As further changes in future
economic or industry conditions occur, the Company will revise the estimates that were used to calculate its inventory reserves.
At December 31, 2012 and 2011, reserves for LCM, excess and obsolete inventory totaled $135.6 million and $120.1 million,
respectively.
If actual conditions are less favorable than those the Company has projected, the Company will increase its reserves for LCM,
excess and obsolete inventory accordingly. Any increase in the Company’s reserves will adversely impact its results of operations.
The establishment of a reserve for LCM, excess and obsolete inventory establishes a new cost basis in the inventory. Such reserves
are not reduced until the product is sold.
F-8
Debt Issuance Costs. Debt issuance costs incurred in securing the Company’s financing arrangements are capitalized and amortized
over the term of the associated debt. Capitalized debt issuance costs related to debt that is extinguished early are charged to
expense at the time of retirement. Debt issuance costs were $41.2 million and $42.7 million (net of accumulated amortization of
$10.2 million and $11.9 million) at December 31, 2012 and 2011, respectively.
Intangible Assets. Intangible assets include purchased patents, trademarks, customer relationships and other specifically
identifiable assets and are amortized on a straight-line basis over the respective estimated useful lives, which range from one to
fifty-four years. Intangible assets are reviewed for impairment when circumstances warrant.
Goodwill. Goodwill, representing the difference between the total purchase price and the fair value of assets (tangible and
intangible) and liabilities at the date of acquisition, is reviewed for impairment annually, and more frequently as circumstances
warrant, and written down only in the period in which the recorded value of such assets exceed their fair value. The Company
selected October 1 as the date for the required annual impairment test.
Goodwill is tested for impairment at the reporting unit level, which is defined as an operating segment or a component of an
operating segment that constitutes a business for which discrete financial information with similar economic characteristics is
available and the operating results are regularly reviewed by the Company’s management. The Aerial Work Platforms (“AWP”),
Construction, Cranes and Materials Processing (“MP”) operating segments plus the Material Handling business (including services)
and Port Solutions business of MHPS, comprise the six reporting units for goodwill impairment testing purposes.
The Company adopted Financial Accounting Standards Board (the “FASB”) Accounting Standards Update (“ASU”) ASU 2011-08,
“Intangibles – Goodwill and Other (Topic 350),” (“ASU 2011-08”) at the beginning of its fourth quarter of 2011 on a prospective
basis. See “Recent Accounting Pronouncements” below. ASU 2011-08 allows us to first assess, qualitatively, whether it is
necessary to perform the quantitative two-step goodwill impairment test as described below. If we believe, as a result of our
qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the
quantitative two-step goodwill impairment process is required. We have the unconditional option to bypass the qualitative
assessment and proceed directly to performing the first step of the quantitative goodwill impairment test.
The quantitative goodwill impairment analysis is a two-step process. The first step used to identify potential impairment involves
comparing each reporting unit’s estimated fair value to its carrying value, including goodwill. The Company uses an income
approach derived from a discounted cash flow model to estimate the fair value of its reporting units. The aggregate fair value of
the Company’s reporting units is compared to the Company’s market capitalization on the valuation date to assess its reasonableness.
The initial recognition of goodwill, as well as the annual review of the carrying value of goodwill, requires that the Company
develop estimates of future business performance. These estimates are used to derive expected cash flow and include assumptions
regarding future sales levels and the level of working capital needed to support a given business. The Company relies on data
developed by business segment management as well as macroeconomic data in making these calculations. The discounted cash
flow model also includes a determination of the Company’s weighted average cost of capital. The cost of capital is based on
assumptions about interest rates as well as a risk-adjusted rate of return required by the Company’s equity investors. Changes in
these estimates can impact the present value of the expected cash flow that is used in determining the fair value of acquired
intangible assets as well as the overall expected value of a given business.
The second step of the process involves the calculation of an implied fair value of goodwill for each reporting unit for which step
one indicated impairment. The implied fair value of goodwill is determined by measuring the excess of the estimated fair value
of the reporting unit over the estimated fair values of the individual assets, liabilities and identifiable intangibles as if the reporting
unit was being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill
assigned to the reporting unit, there is no impairment. If the carrying value of goodwill assigned to a reporting unit exceeds the
implied fair value of the goodwill, an impairment charge is recorded for the excess. An impairment loss cannot exceed the carrying
value of goodwill assigned to a reporting unit and the subsequent reversal of goodwill impairment losses is not permitted.
There were no indicators of goodwill impairment in the tests performed as of October 1, 2012, 2011 and 2010. See Note J –
“Goodwill and Intangible Assets, Net” in the Notes to the Consolidated Financial Statements.
Property, Plant and Equipment. Property, plant and equipment are stated at cost. Expenditures for major renewals and
improvements are capitalized while expenditures for maintenance and repairs not expected to extend the life of an asset beyond
its normal useful life are charged to expense when incurred. Plant and equipment are depreciated over the estimated useful lives
(1-40 years and 2-20 years, respectively) of the assets under the straight-line method of depreciation for financial reporting purposes
and both straight-line and other methods for tax purposes.
F-9
Impairment of Long-Lived Assets. The Company’s policy is to assess the realizability of its long-lived assets, including intangible
assets, and to evaluate such assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of such assets (or group of assets) may not be recoverable. Impairment is determined to exist if fair value based on the estimated
future undiscounted cash flows are less than the carrying value. Future cash flow projections include assumptions for future sales
levels and the level of working capital needed to support each business. The Company uses data developed by business segment
management as well as macroeconomic data in making these calculations. The amount of any impairment then recognized would
be calculated as the difference between estimated fair value and the carrying value of the asset. The Company recognized asset
impairments of $8.9 million, $18.8 million and $11.4 million for the years ended December 31, 2012, 2011 and 2010, respectively,
of which, $5.7 million, $8.8 million and $9.3 million, respectively, were recognized as part of restructuring costs. See Note L –
“Restructuring and Other Charges.”
Accounts Receivable and Allowance for Doubtful Accounts. Trade accounts receivable are recorded at the invoiced amount and
do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses
in its existing accounts receivable. The Company determines the allowance based on historical customer review and current
financial conditions. The Company reviews its allowance for doubtful accounts at least quarterly. Past due balances over 90 days
and over a specified amount are reviewed individually for collectability. All other balances are reviewed on a pooled basis by
type of receivable. Account balances are charged off against the allowance when the Company determines it is probable the
receivable will not be recovered. There can be no assurance that the Company’s historical accounts receivable collection experience
will be indicative of future results. The Company has off-balance sheet credit exposure related to guarantees provided to financial
institutions as disclosed in Note Q – “Litigation and Contingencies.” Substantially all receivables were trade receivables at
December 31, 2012 and 2011.
Revenue Recognition. Revenue and related costs are generally recorded when products are shipped and invoiced to either
independently owned and operated dealers or to customers. Shipping and handling charges are recorded in Cost of goods sold.
Revenue generated in the United States is recognized when title and risk of loss pass from the Company to its customers which
generally occurs upon shipment depending upon the shipping terms negotiated. The Company also has a policy which requires
it to meet certain criteria in order to recognize revenue, including satisfaction of the following requirements:
a) Persuasive evidence that an arrangement exists;
b) The price to the buyer is fixed or determinable;
c) Collectability is reasonably assured; and
d) The Company has no significant obligations for future performance.
In the United States, the Company has the ability to enter into a security agreement and receive a security interest in the product
by filing an appropriate Uniform Commercial Code (“UCC”) financing statement. However, a significant portion of the Company’s
revenue is generated outside of the United States. In many countries outside of the United States, as a matter of statutory law, a
seller retains title to a product until payment is made. The laws do not provide for a seller’s retention of a security interest in
goods in the same manner as established in the UCC. In these countries, the Company retains title to goods delivered to a customer
until the customer makes payment so that the Company can recover the goods in the event of customer default on payment. In
these circumstances, where the Company only retains title to secure its recovery in the event of customer default, the Company
also has a policy requiring it to meet certain criteria in order to recognize revenue, including satisfaction of the following
requirements:
a) Persuasive evidence that an arrangement exists;
b) Delivery has occurred or services have been rendered;
c) The price to the buyer is fixed or determinable;
d) Collectability is reasonably assured;
e) The Company has no significant obligations for future performance; and
f) The Company is not entitled to direct the disposition of the goods, cannot rescind the transaction, cannot prohibit
the customer from moving, selling, or otherwise using the goods in the ordinary course of business and has no
other rights of holding title that rest with a titleholder of property that is subject to a lien under the UCC.
In circumstances where the sales transaction requires acceptance by the customer for items such as testing on site, installation,
trial period or performance criteria, revenue is not recognized unless the following criteria have been met:
a) Persuasive evidence that an arrangement exists;
b) Delivery has occurred or services have been rendered;
c) The price to the buyer is fixed or determinable;
F-10
d) Collectability is reasonably assured; and
e) The customer has given their acceptance, the time period has elapsed or the Company has otherwise objectively
demonstrated that the criteria specified in the acceptance provisions have been satisfied.
In addition to performance commitments, the Company analyzes factors such as the reason for the purchase to determine if
revenue should be recognized. This analysis is done before the product is shipped and includes the evaluation of factors that
may affect the conclusion related to the revenue recognition criteria as follows:
a) Persuasive evidence that an arrangement exists;
b) Delivery has occurred or services have been rendered;
c) The price to the buyer is fixed or determinable; and
d) Collectability is reasonably assured.
Revenue from sales-type leases is recognized at the inception of the lease. Income from operating leases is recognized ratably
over the term of the lease. The Company routinely sells equipment subject to operating leases and the related lease payments. If
the Company does not retain a substantial risk of ownership in the equipment, the transaction is recorded as a sale. If the Company
does retain a substantial risk of ownership, the transaction is recorded as a borrowing, the operating lease payments are recognized
as revenue over the term of the lease and the debt is amortized over a similar period.
The Company, from time to time, issues buyback guarantees in conjunction with certain sales agreements. These primarily relate
to trade value agreements (“TVAs”) in which a customer may trade in equipment in the future at a stated price/credit if the customer
meets certain conditions. The trade-in price/credit is determined at the time of the original sale of equipment. In conjunction with
the trade-in, these conditions include a requirement to purchase new equipment at fair market value at the time of trade-in, which
fair value is required to be of equal or greater value than the original equipment cost. Other conditions also include the general
functionality and state of repair of the machine. The Company has concluded that any credit provided to customers under a TVA/
buyback guarantee, which is expected to be equal to or less than the fair value of the equipment returned on the trade-in date, is
a guarantee to be accounted for in accordance with Accounting Standards Codification (“ASC”) 460, “Guarantees” (“ASC 460”).
The original sale of equipment, accompanied by a buyback guarantee, is a multiple element transaction wherein the Company
offers its customer the right, after some period of time, for a limited period of time, to exchange purchased equipment for a fixed
price trade-in credit toward another of our products. The fixed price trade-in credit is accounted for under the guidance provided
by ASC 460. Pursuant to this right, the Company has agreed to make a payment (in the form of a trade-in credit) to the customer
contingent upon the customer exercising its right to trade in the original purchased equipment. Under the guidance of ASC 460,
the Company records the fixed price trade-in credit at its fair value. Accordingly, as noted above, the Company has accounted for
the trade-in credit as a separate deliverable in a multiple element arrangement.
When a sales transaction includes multiple deliverables, such as sales of multiple products or sales of products and services that
are delivered over multiple reporting periods, the multiple deliverables are evaluated to determine the units of accounting, and the
entire fee from the arrangement is allocated to each unit of accounting based on the relative selling price. The selling price of a
unit of accounting is determined using a selling price hierarchy. Vendor-specific objective evidence (“VSOE”) is established based
upon the price charged for products and services that are sold separately in standalone transactions. If VSOE cannot be established,
third-party evidence (“TPE”) is evaluated based on competitor prices for similar deliverables when sold separately. If neither
VSOE or TPE is available, management's best estimate of selling price is established based upon the price at which the Company
would sell the product on a standalone basis taking into consideration factors including, but not limited to, internal costs, gross
margin objectives, pricing practices and market conditions. Revenue is recognized when the revenue recognition criteria for each
unit of accounting are met.
Guarantees. The Company records a liability for the estimated fair value of guarantees issued pursuant to ASC 460. The Company
recognizes a loss under a guarantee when its obligation to make payment under the guarantee is probable and the amount of the
loss can be estimated. A loss would be recognized if the Company’s payment obligation under the guarantee exceeds the value it
can expect to recover to offset such payment, primarily through the sale of the equipment underlying the guarantee.
Accrued Warranties. The Company records accruals for potential warranty claims based on its claim experience. The Company’s
products are typically sold with a standard warranty covering defects that arise during a fixed period. Each business provides a
warranty specific to the products it offers. The specific warranty offered by a business is a function of customer expectations and
competitive forces. Warranty length is generally a fixed period of time, a fixed number of operating hours, or both.
F-11
A liability for estimated warranty claims is accrued at the time of sale. The non-current portion of the warranty accrual is included
in Other non-current liabilities in the Company’s Consolidated Balance Sheet. The liability is established using historical warranty
claim experience for each product sold. Historical claim experience may be adjusted for known design improvements or for the
impact of unusual product quality issues. Warranty reserves are reviewed quarterly to ensure critical assumptions are updated for
known events that may affect the potential warranty liability.
The following table summarizes the changes in the consolidated product warranty liability (in millions):
Balance as of December 31, 2010
Accruals for warranties issued during the period
Business acquired during the period
Changes in estimates
Settlements during the year
Foreign exchange effect/other
Balance as of December 31, 2011
Accruals for warranties issued during the period
Changes in estimates
Settlements during the year
Foreign exchange effect/other
Balance as of December 31, 2012
$
103.0
74.9
24.7
11.5
(76.5)
(3.5)
134.1
55.3
0.1
(80.7)
1.6
$
110.4
Accrued Product Liability. The Company records accruals for product liability claims when deemed probable and estimable
based on facts and circumstances, and prior claim experience. Accruals for product liability claims are valued based upon the
Company’s prior claims experience, including consideration of the jurisdiction, circumstances of the accident, type of loss or
injury, identity of plaintiff, other potential responsible parties, analysis of outside legal counsel, analysis of internal product liability
counsel and the experience of the Company’s director of product safety. Actual product liability costs could be different due to a
number of variables such as the decisions of juries or judges.
Defined Benefit Pension and Other Postretirement Benefits. The Company provides postretirement benefits to certain former
salaried and hourly employees and certain hourly employees covered by bargaining unit contracts that provide such benefits. The
Company accounts for these benefits under ASC 715, “Compensation-Retirement Benefits” (“ASC 715”). ASC 715 requires
balance sheet recognition of the overfunded or underfunded status of pension and postretirement benefit plans. Under ASC 715,
actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been
recognized under previous accounting standards must be recognized in Accumulated other comprehensive income, net of tax
effects, until they are amortized as a component of net periodic benefit cost. See Note O – “Retirement Plans and Other Benefits.”
Deferred Compensation. The Company maintains a Deferred Compensation Plan, which is described more fully in Note O –
“Retirement Plans and Other Benefits.” The Company’s common stock, par value $0.01 per share (“Common Stock”) held in a
rabbi trust pursuant to the Company’s Deferred Compensation Plan, is treated in a manner similar to treasury stock and is recorded
at cost within Stockholders’ equity as of December 31, 2012 and 2011. The plan obligations for participant deferrals in the
Company’s Common Stock are classified as Additional paid-in capital within Stockholders’ equity. The total of the Company’s
Common Stock required to settle this deferred compensation obligation is included in the denominator in both basic and diluted
earnings per share calculations.
Stock-Based Compensation. At December 31, 2012, the Company had stock-based employee compensation plans, which are
described more fully in Note P – “Stockholders’ Equity.” The Company accounts for those plans under the recognition and
measurement principles of ASC 718, “Compensation–Stock Compensation” (“ASC 718”). ASC 718 requires that expense resulting
from all share-based payment transactions be recognized in the financial statements at fair value.
Foreign Currency Translation. Assets and liabilities of the Company’s non-U.S. operations are translated at year-end exchange
rates. Income and expenses are translated at average exchange rates prevailing during the year. For operations whose functional
currency is the local currency, translation adjustments are recorded in the Accumulated other comprehensive income component
of Stockholders’ equity. Gains or losses resulting from foreign currency transactions are recorded in the accounts based on the
underlying transaction.
F-12
Derivatives. Derivative financial instruments are recorded in the Consolidated Balance Sheet at their fair value as either assets
or liabilities. Changes in the fair value of derivatives are recorded each period in earnings or Accumulated other comprehensive
income, depending on whether a derivative is designated and effective as part of a hedge transaction and, if it is, the type of hedge
transaction. Gains and losses on derivative instruments reported in Accumulated other comprehensive income are included in
earnings in the periods in which earnings are affected by the hedged item. See Note K – “Derivative Financial Instruments.”
Environmental Policies. Environmental expenditures that relate to current operations are either expensed or capitalized depending
on the nature of the expenditure. Expenditures relating to conditions caused by past operations that do not contribute to current
or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or remedial actions are
probable and the costs can be reasonably estimated. Such amounts were not material at December 31, 2012 and 2011.
Research and Development Costs. Research and development costs are expensed as incurred. Such costs incurred in the
development of new products or significant improvements to existing products are included in Selling, general and administrative
expenses. Research and development costs were $75.6 million, $73.7 million and $59.9 million during 2012, 2011 and 2010,
respectively.
Income Taxes. The Company accounts for income taxes using the asset and liability method. This method requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial
statement carrying amounts and the tax bases of assets and liabilities. See Note C – “Income Taxes.”
Earnings Per Share. Basic (loss) earnings per share is computed by dividing Net (loss) income attributable to Terex Corporation
for the period by the weighted average number of shares of Common Stock outstanding. Diluted earnings per share is computed
by dividing Net (loss) income attributable to Terex Corporation for the period by the weighted average number of shares of Common
Stock outstanding and potential dilutive common shares. See Note E – “Earnings Per Share.”
Fair Value Measurements. Assets and liabilities measured at fair value on a recurring basis under the provisions of ASC 820,
“Fair Value Measurement and Disclosure” (“ASC 820”) include interest rate swap and foreign currency forward contracts discussed
in Note K – “Derivative Financial Instruments.” These contracts are valued using a market approach, which uses prices and other
relevant information generated by market transactions involving identical or comparable assets or liabilities. ASC 820 establishes
a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data
(observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted
assets or liabilities;
Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for
substantially the full term of the asset or liability; and
Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and
unobservable (i.e., supported by little or no market activity).
Determining which category an asset or liability falls within this hierarchy requires judgment. The Company evaluates its hierarchy
disclosures each quarter.
Recent Accounting Pronouncements. In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820):
Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which
amended ASC 820, “Fair Value Measurements and Disclosures.” This guidance addresses efforts to achieve convergence between
U.S. GAAP and International Financial Reporting Standards (“IFRS”) requirements for measurement of and disclosures about
fair value. The amendments are not expected to have a significant impact on companies applying U.S. GAAP. Key provisions of
the amendment include: a prohibition on grouping financial instruments for purposes of determining fair value, except when an
entity manages market and credit risks on the basis of the entity’s net exposure to the group; an extension of the prohibition against
the use of a blockage factor to all fair value measurements (that prohibition currently applies only to financial instruments with
quoted prices in active markets); and a requirement that for recurring Level 3 fair value measurements, entities disclose quantitative
information about unobservable inputs, a description of the valuation process used and qualitative details about the sensitivity of
the measurements. In addition, for items not carried at fair value but for which fair value is disclosed, entities will be required to
disclose the level within the fair value hierarchy that applies to the fair value measurement disclosed. This guidance was effective
for the Company in its interim and annual reporting periods beginning after December 15, 2011. Adoption of this guidance did
not have a significant impact on the determination or reporting of the Company’s financial results.
F-13
In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive
Income,” (“ASU 2011-05”) which amends current comprehensive income guidance. This accounting update eliminates the option
to present components of other comprehensive income as part of the statement of stockholders’ equity. Instead, the Company must
report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net
income and other comprehensive income, or in two separate but consecutive statements. In December 2011, the FASB issued ASU
2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated
Other Comprehensive Income in ASU 2011-05,” (“ASU 2011-12”). ASU 2011-12 defers the requirement that companies present
reclassification adjustments for each component of accumulated other comprehensive income in both net income and other
comprehensive income on the face of the financial statements. ASU 2011-05 and 2011-12 were effective for the Company on
January 1, 2012. Since the provisions of ASU 2011-05 and 2011-12 are presentation related only, adoption of ASU 2011-05 and
2011-12 did not have a significant impact on the determination or reporting of the Company’s financial results.
In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and
Liabilities,” (“ASU 2011-11”). ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements
to enable users of its financial statements to understand the effect of those arrangements on its financial position. ASU 2011-11
is effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods.
Adoption of this guidance is not expected to have a significant impact on the determination or reporting of the Company’s financial
results.
In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible
Assets for Impairment,” (“ASU 2012-02”). ASU 2012-02 amends the guidance in ASC 350-30 on testing indefinite-lived intangible
assets, other than goodwill, for impairment. Under ASU 2012-02, an entity has the option of performing a qualitative assessment
of whether it is more likely than not that the fair value of an entity’s indefinite-lived intangible asset is less than its carrying amount
before calculating the fair value of the asset. If the conclusion is that it is more likely than not that the fair value of an indefinite-
lived intangible asset is less than its carrying amount, the Company would be required to calculate the fair value of the asset. ASU
2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with
early adoption permitted. Adoption of this guidance is not expected to have a significant impact on the determination or reporting
of the Company’s financial results.
In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income,” (“ASU 2013-02”). ASU 2013-02 adds new disclosure requirements for items reclassified out of accumulated other
comprehensive income (“AOCI”). ASU 2013-02 intends to help the Company improve the transparency of changes in other
comprehensive income (“OCI”) and items reclassified out of AOCI in the Company's financial statements. ASU 2013-02 does
not amend any existing requirements for reporting net income or OCI in the Company's financial statements. ASU 2013-02 is
effective for annual and interim reporting periods beginning after December 15, 2012. Adoption of this guidance is not expected
to have a significant impact on the determination or reporting of the Company's financial results.
NOTE B – BUSINESS SEGMENT INFORMATION
Terex is a diversified global equipment manufacturer of specialized machinery products. The Company is focused on delivering
reliable, customer-driven solutions for a wide range of commercial applications, including the construction, infrastructure,
quarrying, mining, manufacturing, shipping, transportation, refining, energy and utility industries. The Company operates in five
reportable segments: (i) AWP; (ii) Construction; (iii) Cranes; (iv) MHPS; and (v) MP.
The AWP segment designs, manufactures, refurbishes, services and markets aerial work platform equipment, telehandlers, light
towers, bridge inspection equipment and utility equipment as well as their related components and replacement parts. Customers
use these products to construct and maintain industrial, commercial and residential buildings and facilities, construct and maintain
utility and telecommunication lines, trim trees, in construction and foundation drilling applications and for other commercial
operations, as well as in a wide range of infrastructure projects.
The Construction segment designs, manufactures and markets heavy and compact construction equipment, roadbuilding equipment,
including asphalt and concrete equipment and landfill compactors, as well as their related components and replacement parts.
Customers use these products in construction and infrastructure projects, in building roads and bridges, in quarrying and mining
operations and for material handling applications.
On February 11, 2013, the Company announced that it entered into a definitive agreement to divest its Roadbuilding operations
in Brazil and assets for its asphalt paver, reclaimer stabilizer and material transfer product lines which are currently manufactured
in Oklahoma City. The transaction is anticipated to close during the first quarter of 2013. The Company has also determined that
it will be exiting the remaining roadbuilding product lines that it manufactures in Oklahoma City.
F-14
The Cranes segment designs, manufactures, services and markets mobile telescopic cranes, tower cranes, lattice boom crawler
cranes, lattice boom truck cranes and truck-mounted cranes (boom trucks), as well as their related components and replacement
parts. Cranes products are used primarily for construction, repair and maintenance of commercial buildings, manufacturing
facilities and infrastructure projects.
The MHPS segment designs, manufactures, refurbishes, services and markets industrial cranes, including standard 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, gantry cranes, ship-to-shore 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 material handling at manufacturing, port and rail facilities. The MHPS segment also operates an extensive
global sales and service network.
The MHPS segment was formed upon the completion of the Company’s acquisition of a majority interest in the shares of Demag
Cranes AG on August 16, 2011. See Note I – “Acquisitions.” Accordingly, the results of Demag Cranes AG and its subsidiaries
(“Demag Cranes”) are consolidated within MHPS from its date of acquisition. The Company acquired the port equipment
businesses of Reggiane Cranes and Plants S.p.A. and Noell Crane Holding GmbH (collectively, “Terex Port Equipment” or the
“Port Equipment Business”) on July 23, 2009. Subsequently, effective July 1, 2012, the Company realigned certain operations to
provide a single source for serving port equipment customers. The Terex Port Equipment Business and the Company’s French
reach stacker business, both formerly part of the Cranes segment, are now consolidated within the MHPS segment. As a result,
the 2011 performance of this segment reflects approximately four and a half months of operations of Demag Cranes. Accordingly,
comparisons between the years ended December 31, 2012, 2011 and 2010, respectively must be reviewed in this context.
The MP segment designs, manufactures and markets materials processing equipment, including crushers, washing systems, screens,
apron feeders, chippers and related components and replacement parts. Customers use MP products in construction, infrastructure
and recycling projects, in various quarrying and mining applications, as well as in landscaping and biomass production industries.
The Company assists customers in their rental, leasing and acquisition of its products through Terex Financial Services (“TFS”).
TFS uses its equipment financing experience to provide financing solutions to customers who purchase the Company’s equipment.
The Company has no customers that accounted for more than 10% of consolidated sales in 2012. The results of businesses acquired
during 2012, 2011 and 2010 are included from the dates of their respective acquisitions.
Subsequent to December 31, 2012, the Company realigned certain operations in an effort to strengthen its ability to service
customers and to recognize certain organizational efficiencies. The Company’s Utilities business, formerly part of its AWP segment,
will be consolidated within its Cranes segment for financial reporting periods beginning on or after January 1, 2013. The Company’s
Crane America Services business, formerly part of its MHPS segment, and its legacy AWP services business, formerly part of its
AWP segment, will both be consolidated within the Company’s Cranes segment for financial reporting periods beginning on or
after January 1, 2013 and will be run together as the Company’s North America Services business.
F-15
Included in Eliminations/Corporate are the eliminations among the five segments, as well as general and corporate items. Business
segment information is presented below (in millions):
Year Ended December 31,
2012
2011
2010
$
2,104.6
$
1,750.0
$
$
$
$
$
$
$
1,308.7
1,491.9
1,840.3
661.5
(58.6)
7,348.4
227.7
(43.6)
143.4
13.4
75.3
(17.6)
398.6
16.6
24.3
23.8
65.5
5.1
17.7
153.0
18.5
7.9
9.8
33.5
4.9
7.9
$
$
$
$
$
$
$
82.5
$
1,505.6
1,543.0
1,077.3
682.8
(54.1)
6,504.6
86.3
(18.4)
25.7
(64.7)
59.5
(7.2)
81.2
17.7
25.5
26.9
35.8
5.8
14.9
126.6
14.9
17.5
13.2
17.0
2.6
13.9
79.1
$
$
$
$
$
$
$
1,076.3
1,081.2
1,419.2
364.4
533.1
(56.0)
4,418.2
2.8
(52.0)
54.6
(21.1)
24.5
(82.6)
(73.8)
18.1
28.4
22.9
15.0
5.7
14.7
104.8
19.4
9.7
12.4
1.1
2.6
9.8
55.0
Net Sales
AWP
Construction
Cranes
MHPS
MP
Corporate and Other / Eliminations
Total
Income (loss) from Operations
AWP
Construction
Cranes
MHPS
MP
Corporate and Other / Eliminations *
Total
Depreciation and Amortization
AWP
Construction
Cranes
MHPS
MP
Corporate
Total
Capital Expenditures
AWP
Construction
Cranes
MHPS
MP
Corporate
Total
* Corporate cost allocation method to segments increased in 2011.
F-16
Identifiable Assets
AWP
Construction
Cranes
MHPS
MP
Corporate and Other / Eliminations
Total
December 31,
2012
2011
$
997.2
$
1,124.7
1,686.1
3,004.6
982.0
(1,048.4)
6,746.2
$
$
1,039.5
1,232.3
1,517.4
2,890.2
928.7
(544.7)
7,063.4
Sales between segments are generally priced to recover costs plus a reasonable markup for profit, which is eliminated in
consolidation.
Geographic segment information is presented below (in millions):
Net Sales
United States
United Kingdom
Germany
Other European countries
All other
Total
Long-lived Assets
United States
United Kingdom
Germany
Other European countries
All other
Total
Year Ended December 31,
2012
2011
2010
$
$
2,306.6
282.7
666.8
1,384.9
2,707.4
7,348.4
$
$
$
$
1,858.3
288.6
582.5
1,320.3
2,454.9
6,504.6
$
$
1,191.8
203.6
313.3
891.3
1,818.2
4,418.2
December 31,
2012
2011
192.6
37.2
310.8
107.2
165.5
813.3
$
$
184.5
36.7
313.3
124.2
176.8
835.5
The Company attributes sales to unaffiliated customers in different geographical areas based on the location of the customer.
Long-lived assets consist of net fixed assets, which can be attributed to the specific geographic regions.
NOTE C – INCOME TAXES
The components of income (loss) from continuing operations before income taxes are as follows (in millions):
United States
Foreign
Income (loss) from continuing operations before income taxes
Year Ended December 31,
2012
2011
2010
$
$
136.1
19.5
155.6
$
$
159.1
(74.6)
84.5
$
$
(159.0)
(79.3)
(238.3)
Income (loss) before income taxes including Income (loss) from discontinued operations and Gain (loss) from disposition of
discontinued operations attributable to the Company was $156.7 million, $83.7 million and $584.7 million for the years ended
December 31, 2012, 2011 and 2010, respectively.
F-17
The major components of the Company’s provision for (benefit from) income taxes on continuing operations before income taxes
are summarized below (in millions):
Current:
Federal
State
Foreign
Current income tax provision (benefit)
Deferred:
Federal
State
Foreign
Deferred income tax (benefit) provision
Total provision for (benefit from) income taxes
Year Ended December 31,
2012
2011
2010
$
$
27.4
3.8
48.2
79.4
(9.1)
(0.6)
(15.5)
(25.2)
54.2
$
$
22.8
1.5
28.1
52.4
3.9
5.6
(11.5)
(2.0)
50.4
$
$
(144.1)
(0.8)
10.1
(134.8)
91.4
(2.3)
18.9
108.0
(26.8)
Included in the total benefit from income taxes for the year ended December 31, 2010 was expense of $15.5 million related to
foreign exchange gain included in other comprehensive income. Including discontinued operations and disposition of discontinued
operations, the total (benefit from) provision for income taxes was $53.1 million, $43.0 million and $222.2 million for the years
ended December 31, 2012, 2011 and 2010, respectively.
Deferred tax assets and liabilities result from differences in the bases of assets and liabilities for tax and financial statement
purposes. The tax effects of the basis differences and net operating loss carry forwards as of December 31, 2012 and 2011 for
continuing operations are summarized below for major balance sheet captions (in millions):
Property, plant and equipment
Intangibles
Trade receivables
Inventories
Accrued warranties and product liability
Net operating loss carry forwards
Retirement plans and other
Accrued compensation and benefits
Investments
Credits
Other
Deferred tax assets valuation allowance
Net deferred tax assets (liabilities)
2012
2011
(84.9) $
(145.5)
14.5
52.1
18.2
200.8
75.6
27.2
1.9
16.9
49.9
(172.2)
54.5
$
(67.7)
(152.4)
9.8
51.8
21.6
197.1
57.0
23.7
(7.4)
26.3
28.3
(183.3)
4.8
$
$
Deferred tax assets for continuing operations total $356.5 million before valuation allowances of $172.2 million at December 31,
2012. Total deferred tax liabilities for continuing operations of $129.8 million include $8.0 million in current liabilities and $121.8
million in non-current liabilities on the Consolidated Balance Sheet at December 31, 2012. Included in net deferred tax assets for
continuing operations are income taxes paid on intercompany transactions of $20.7 million and $16.9 million as of December 31,
2012 and 2011, respectively. There were no deferred tax assets for discontinued operations as of December 31, 2012 and 2011.
The Company evaluates the net realizable value of its deferred tax assets each reporting period. The Company must consider all
objective evidence, both positive and negative, in evaluating the future realization of its deferred tax assets, including tax loss
carry forwards. Historical information is supplemented by currently available information about future tax years. Realization
requires sufficient taxable income to use deferred tax assets. The Company records a valuation allowance for each deferred tax
asset for which realization is not assessed as more likely than not. In particular, the assessment by the Company that deferred tax
assets will be realized considered available evidence including: (i) estimates of future taxable income generated from various
sources, including the continued recovery of operations in the U.S. and the United Kingdom and anticipated future recovery in
F-18
Brazil, (ii) the reversal of taxable temporary differences, (iii) increased profitability due to cost reductions in recent years, (iv) the
anticipated combination of certain businesses in the United Kingdom in the future, which were weighed against losses in the U.S.
and the United Kingdom in late 2008 through 2010 and 2011 losses in Brazil. If the current estimates of future taxable income
are not realized or future estimates of taxable income are reduced, then the assessment regarding the realization of deferred tax
assets in certain jurisdictions, including the U.S., Brazil and the United Kingdom, could change and have a material impact on
the statement of income. In 2010, the Company recorded a valuation allowance for its Italian operations due to changes in the
expectation of future taxable income. The valuation allowance for deferred tax assets as of December 31, 2012 and 2011 was
$172.2 million and $183.3 million, respectively. The net change in the total valuation allowance for the years ended December 31,
2012 and 2011 was a decrease of $11.1 million and an increase of $25.7 million, respectively.
The Company’s Provision for (benefit from) income taxes is different from the amount that would be provided by applying the
statutory federal income tax rate to the Company’s Income (loss) from continuing operations before income taxes. The reasons
for the difference are summarized as follows (in millions):
Tax at statutory federal income tax rate
State taxes (net of Federal benefit)
Change in valuation allowance
Foreign tax differential on income/losses of foreign subsidiaries
U.S. tax on multi-national operations
Change in foreign statutory rates
U.S. manufacturing and export incentives
Tax on foreign exchange amounts reported in accumulated other
comprehensive income
Other
Total provision for (benefit from) income taxes
Year Ended December 31,
2012
2011
2010
$
$
$
54.5
2.0
14.2
(17.8)
(4.1)
3.2
(4.0)
—
6.2
54.2
$
29.6
4.3
18.1
(7.1)
(0.1)
4.9
(1.7)
—
2.4
50.4
$
$
(83.4)
(9.0)
35.1
7.6
0.2
2.5
6.4
15.5
(1.7)
(26.8)
The $6.4 million of expense for U.S. manufacturing and export incentives for the year ended December 31, 2010 was due to the
carry back of the 2009 U.S. Federal net operating loss which reduced prior year U.S. manufacturing incentives. The effective tax
rate on income from discontinued operations in 2010 differs from the statutory rate primarily due to deferred income taxes not
previously provided on the excess of the amount for financial reporting over the tax basis in the Company’s investment in the
shares of certain subsidiaries, and the recognition of uncertain tax positions.
Except for a limited number of immaterial subsidiaries, the Company does not provide for foreign income and withholding, U.S.
Federal, or state income taxes or tax benefits on the financial reporting basis over the tax basis of its investments in foreign
subsidiaries because such amounts are indefinitely reinvested to support operations and continued growth plans outside the U.S.
At December 31, 2012, the Company’s financial reporting basis in its foreign subsidiaries exceeded its tax basis by approximately
$851 million. The Company reviews its plan to indefinitely reinvest on a quarterly basis. In making its decision to indefinitely
reinvest, the Company evaluates its plans of reinvestment, its ability to control repatriation, and the need, if any, to repatriate funds
to support U.S. operations. If the assessment of the Company with respect to earnings of foreign subsidiaries changes, deferred
U.S. income taxes, foreign income taxes, and foreign withholding taxes may have to be accrued. At this time, determination of
the unrecognized deferred tax liabilities for temporary differences related to the investment in foreign subsidiaries is not practical.
At December 31, 2012, the Company had domestic federal net operating loss carry forwards of $14.5 million. None of the
remaining U.S. federal net operating loss carry forwards expire before 2017. The Company also has various state net operating
loss carry forwards available to reduce future state taxable income and income taxes. These net operating loss carry forwards
expire at various dates through 2032.
In addition, at December 31, 2012, the Company’s foreign subsidiaries had approximately $709 million of loss carry forwards,
consisting of $210 million in Germany, $190 million in Italy, $90 million in the United Kingdom, $47 million in Spain, $46 million
in China and $126 million in other countries, which are available to offset future foreign taxable income. The majority of these
foreign tax loss carry forwards are available without expiration.
The Company had total net income tax (refunds) payments including discontinued operations of $224.2 million, $(36.3) million
and $47.5 million in 2012, 2011 and 2010, respectively. At December 31, 2012 and 2011, Other current assets included net income
tax receivable amounts of $27.6 million and $27.1 million respectively.
F-19
The Company and its subsidiaries conduct business globally and file income tax returns in U.S. federal, state and foreign
jurisdictions, as required. From a tax perspective, major jurisdictions where the Company is often subject to examination by tax
authorities include Australia, Germany, Italy, the United Kingdom and the U.S. Currently, various entities of the Company are
under audit in Germany, Italy, the U.S. and elsewhere. With few exceptions, including certain subsidiaries in Germany that are
under audit, the statute of limitations for the Company and its subsidiaries has, as a practical matter expired for tax years prior to
2007. The Company assesses uncertain tax positions for recognition, measurement and effective settlement. Where the Company
has determined that its tax return filing position does not satisfy the more likely than not recognition threshold of ASC 740, “Income
Taxes,” it has recorded no tax benefits. Where the Company has determined that its tax return filing positions are more likely
than not to be sustained, the Company has measured and recorded the largest amount of tax benefit greater than 50% likely to be
realized. The Company recognizes accrued interest and penalties, if any, related to income taxes as (Provision for) benefit from
income taxes in its Consolidated Statement of Income.
The following table summarizes the activity related to the Company’s total (including discontinued operations) unrecognized
tax benefits (in millions):
$
$
151.1
3.4
20.7
(7.0)
(1.2)
(1.3)
(25.3)
1.3
141.7
0.7
15.2
(10.5)
—
(3.3)
(14.8)
40.6
169.6
—
15.1
(22.3)
—
(23.2)
(1.3)
10.7
148.6
Balance as of January 1, 2010
Additions for current year tax positions
Additions for prior year tax positions
Reductions for prior year tax positions
Reductions for tax positions related to current year
Reductions related to expiration of statute of limitations
Settlements
Acquired balances
Balance as of December 31, 2010
Additions for current year tax positions
Additions for prior year tax positions
Reductions for prior year tax positions
Reductions for tax positions related to current year
Reductions related to expiration of statute of limitations
Settlements
Acquired balances
Balance as of December 31, 2011
Additions for current year tax positions
Additions for prior year tax positions
Reductions for prior year tax positions
Reductions for tax positions related to current year
Reductions related to expiration of statute of limitations
Settlements
Acquired balances
Balance as of December 31, 2012
F-20
The Company evaluates each reporting period whether it is reasonably possible that material changes to its uncertain tax position
liability could occur in the next twelve months. Changes may occur as a result of uncertain tax positions being considered effectively
settled, re-measured, paid, acquired or divested, as the result of a change in the accounting rules, tax law or judicial decision, or
due to the expiration of the relevant statute of limitations. It is not possible to predict which uncertain tax positions, if any, may
be challenged by tax authorities. The timing and impact of income tax audits and their resolution is highly uncertain. New laws
and judicial decisions can change assessments concerning technical merit and measurement. The amounts of or periods in which
changes to reserves for uncertain tax positions will occur is generally unascertainable. The Company believes it is reasonably
possible that the total amount of unrecognized tax benefits disclosed as of December 31, 2012 may decrease approximately $61
million in the fiscal year ending December 31, 2013. Such possible decrease relates primarily to audit settlements for valuation,
transfer pricing, deductibility issues and the expiration of statutes of limitation.
As of December 31, 2012 and 2011, the Company had $148.6 million and $169.6 million, respectively, of unrecognized tax
benefits. Of the $148.6 million at December 31, 2012, $119.5 million, if recognized, would affect the effective tax rate. As of
December 31, 2012 and 2011, the liability for potential penalties and interest was $14.1 million and $19.3 million, respectively.
During the years ended December 31, 2012 and 2011, the Company recognized tax (benefit) expense of $(5.2) million and $(6.3)
million, respectively, for interest and penalties.
With the exception of goodwill, the Company recorded deferred taxes on differences between the book and tax bases of Demag
Cranes AG assets and liabilities acquired. In general, acquired goodwill in a non-taxable business combination is not amortized
and not deductible for tax purposes. See Note I – “Acquisitions.”
NOTE D – DISCONTINUED OPERATIONS
On February 19, 2010, the Company completed the disposition of its Mining business to Bucyrus International, Inc. (“Bucyrus”)
and received approximately $1 billion in cash and approximately 5.8 million shares of Bucyrus common stock. Following this
transaction, the Company invested in its current businesses and focused on products and services where it can maintain and build
a strong market presence. The products divested by the Company in the transaction included hydraulic mining excavators, high
capacity surface mining trucks, track and rotary blasthole drills, drill tools and highwall mining equipment, as well as the related
parts and aftermarket service businesses, including the Company-owned distribution locations. The Company recorded a
cumulative gain on the sale of its Mining business of approximately $605 million, net of tax through December 31, 2012. During
the year ended December 31, 2012, the Company paid taxes of approximately $124 million related to the sale of its Mining
business, which has been included in operating cash flows.
The Company was involved in a dispute with Bucyrus (which was subsequently purchased by Caterpillar, Inc., (“Caterpillar”))
regarding the calculation of the value of the net assets of the Mining business (the “Dispute”). Bucyrus initially provided the
Company with their calculation of the net asset value of the Mining business, which sought a payment of approximately $149
million from the Company to Bucyrus. In January 2013, the Company reached an agreement with Caterpillar that settled the
Dispute. As part of the settlement, the Company made a payment to Caterpillar of an immaterial amount.
During the year ended, December 31, 2011 the Company sold approximately 5.8 million shares of Bucyrus common stock for net
proceeds of $531.8 million, resulting in a gain of $167.8 million, which was recorded in Other income (expense) in the Consolidated
Statement of Income. As of December 31, 2011, the Company had no shares of Bucyrus stock remaining.
In March 2010, the Company sold the assets of its Powertrain gears business and pumps business, which were formerly part of
the Construction segment. Total proceeds on the sale of these businesses were approximately $2 million.
On March 10, 2010, the Company entered into an agreement to sell all of its Atlas heavy construction equipment and knuckle-
boom cranes businesses (collectively, “Atlas”) to Atlas Maschinen GmbH (“Atlas Maschinen”). Fil Filipov, a former Terex
executive and the father of Steve Filipov, the Company’s President, MHPS, is the Chairman of Atlas Maschinen. The Atlas product
lines divested in the transaction included crawler, wheel and rail excavators, knuckle-boom truck loader cranes and Terex® Atlas
branded material handlers. The transaction also includes the Terex Atlas UK distribution business for truck loader cranes in the
United Kingdom and the Terex minority ownership position in an Atlas Chinese joint venture. The Atlas business was previously
reported in the Construction segment, with the exception of the knuckle-boom truck loader cranes business, which was reported
in the Cranes segment. The Company completed the portion of this transaction related to the operations in Germany on April 15,
2010 and the operations in the United Kingdom on August 11, 2010. The Company recorded a cumulative loss on the sale of
Atlas of approximately $14 million, net of tax, through December 31, 2012.
Due to the divestiture of these businesses, the reporting of these businesses has been included in discontinued operations for all
periods presented.
F-21
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 Consolidated Statement of Income (in
millions):
Net sales
(Loss) income from discontinued operations before income taxes
(Provision for) benefit from income taxes
Income (loss) from discontinued operations – net of tax
(Loss) gain on disposition of discontinued operations
Benefit from (provision for) income taxes
Gain (loss) on disposition of discontinued operations – net of tax
Year Ended December 31,
2012
2011
2010
— $
— $
157.7
1.2
0.6
1.8
$
$
(0.1) $
0.5
0.4
$
(0.1) $
5.9
5.8
$
(0.7) $
1.5
0.8
$
(9.7)
(5.6)
(15.3)
832.7
(243.4)
589.3
$
$
$
$
$
During the year ended December 31, 2012, a net tax benefit of $0.6 million was recognized in discontinued operations, comprising
of a $2.5 million tax benefit for the resolution of uncertain tax positions for pre-divestiture years in the Mining business and a
$1.9 million tax provision related to pre-divestiture tax receivables which are not collectible. For the years ended December 31,
2011 and 2010, a tax benefit of $5.9 million and a tax provision of $5.6 million, respectively, was recognized in discontinued
operations for the resolution of uncertain tax positions for pre-divestiture years in the Mining business. During the year ended
December 31, 2012, the Company recorded a $2.3 million gain on the sale of its Atlas business based on contractually obligated
earnings based payments from the purchaser and a $1.9 million loss related to the settlement of the Dispute. During the year ended
December 31, 2011 the Company recorded a $0.8 million gain on the sale of its Mining business. During the year ended December
31, 2010, the Company recorded a net gain of $589.3 million, comprising of a $606.2 million gain related to the sale of the Mining
Business, a $0.4 million loss related to the sale of the Powertrain business and a $16.5 million loss on the sale of the Atlas business.
No assets and liabilities were remaining in discontinued operations entities in the Consolidated Balance Sheet as of December 31,
2012 and 2011.
F-22
NOTE E – EARNINGS PER SHARE
Income (loss) from continuing operations attributable to Terex
Corporation common stockholders
Income (loss) from discontinued operations-net of tax
Gain (loss) on disposition of discontinued operations-net of tax
Net income (loss) attributable to Terex Corporation
Basic shares:
Weighted average shares outstanding
Earnings per share - basic:
Income (loss) from continuing operations
Income (loss) from discontinued operations-net of tax
Gain (loss) on disposition of discontinued operations-net of tax
Net income (loss) attributable to Terex Corporation
Diluted shares:
Weighted average shares outstanding
Effect of dilutive securities:
Stock options, restricted stock awards and convertible notes
Diluted weighted average shares outstanding
Earnings per share - diluted:
Income (loss) from continuing operations
Income (loss) from discontinued operations-net of tax
Gain (loss) on disposition of discontinued operations-net of tax
Net income (loss) attributable to Terex Corporation
For the year ended December 31,
(in millions, except per share data)
2012
2011
2010
103.6
$
38.6
$
1.8
0.4
5.8
0.8
105.8
$
45.2
$
(215.5)
(15.3)
589.3
358.5
110.3
109.5
108.7
$
0.94
0.02
—
0.96
$
110.3
3.6
113.9
0.91
0.02
—
$
0.93
$
0.35
0.05
0.01
0.41
109.5
1.2
110.7
0.35
0.05
0.01
0.41
$
$
$
$
(1.98)
(0.14)
5.42
3.30
108.7
—
108.7
(1.98)
(0.14)
5.42
3.30
$
$
$
$
$
$
The following table provides information to reconcile amounts reported on the Consolidated Statement of Income to amounts
used to calculate earnings per share attributable to Terex Corporation common stockholders (in millions) for the year ended
December 31:
Reconciliation of amounts attributable to common stockholders:
2012
2011
2010
Income (loss) from continuing operations
Noncontrolling interest attributed to income (loss) from continuing
operations
Income (loss) from continuing operations attributable to common
stockholders
$
$
101.4
$
34.1
$
(211.5)
2.2
4.5
(4.0)
103.6
$
38.6
$
(215.5)
Weighted average options to purchase 0.2 million, 0.2 million, and 0.6 million shares of the Company’s common stock, par value
$0.01 per share (“Common Stock”), were outstanding during 2012, 2011 and 2010, respectively, but were not included in the
computation of diluted shares as the effect would be anti-dilutive. Weighted average restricted stock awards of 0.3 million, 0.2
million and 1.1 million shares were outstanding during 2012, 2011 and 2010, respectively, but were not included in the computation
of diluted shares because the effect would be anti-dilutive or performance targets were not yet achieved for awards contingent
upon performance. ASC 260, “Earnings per Share,” requires that employee stock options and non-vested restricted shares granted
by the Company be treated as potential common shares outstanding in computing diluted earnings per share. Under the treasury
stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future services
that the Company has not yet recognized and the amount of tax benefits that would be recorded in additional paid-in capital when
the award becomes deductible are assumed to be used to repurchase shares. The Company includes the impact of pro forma
deferred tax assets in determining the amount of tax benefits for potential windfalls and shortfalls (the differences between tax
deductions and book expense) in this calculation.
F-23
The 4% Convertible Senior Subordinated Notes due 2015 (the “4% Convertible Notes”) described in Note M – “Long-Term
Obligations” are dilutive to the extent the volume-weighted average price of the Common Stock for the period evaluated was
greater than $16.25 per share and earnings from continuing operations were positive. The volume-weighted average price of the
Common Stock was not greater than $16.25 per share for the year ended 2011 and therefore no shares were contingently issuable
during this period. The number of shares that were contingently issuable for the 4% Convertible Notes during 2012 was 2.9
million. The number of shares that were contingently issuable for the 4% Convertible Notes for 2010 was 4.4 million, but was
not included in the computation of diluted shares because the effect would have been anti-dilutive. In August 2012, the Company
repurchased approximately 25% of the principal amount outstanding of the 4% Convertible notes. See Note M – “Long-Term
Obligations.”
NOTE F – INVENTORIES
Inventories consist of the following (in millions):
Finished equipment
Replacement parts
Work-in-process
Raw materials and supplies
Inventories
December 31,
2012
2011
485.4
$
201.4
507.4
521.4
1,715.6
$
465.2
217.7
508.7
566.5
1,758.1
$
$
Reserves for lower of cost or market value, excess and obsolete inventory were $135.6 million and $120.1 million at December 31,
2012 and 2011, respectively.
NOTE G – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment – net consist of the following (in millions):
Property
Plant
Equipment
Property, Plant and Equipment – Gross
Less: Accumulated depreciation
Property, plant and equipment – net
December 31,
2012
2011
$
123.0
$
396.9
713.3
1,233.2
(419.9)
813.3
$
$
123.3
426.4
690.4
1,240.1
(404.6)
835.5
Depreciation expense for the years ended December 31, 2012, 2011 and 2010, was $100.4 million, $89.5 million and $78.6
million, respectively.
NOTE H – EQUIPMENT SUBJECT TO OPERATING LEASES
Operating leases arise from leasing the Company’s products to customers. Initial noncancellable lease terms typically range up
to 84 months. The net book value of equipment subject to operating leases was approximately $58 million and $64 million (net
of accumulated depreciation of approximately $33 million) at December 31, 2012 and 2011, respectively, and is included in Other
assets on the Company’s Consolidated Balance Sheet. The equipment is depreciated on a straight-line basis over its estimated
useful life.
F-24
Future minimum lease payments to be received under noncancellable operating leases with lease terms in excess of one year are
as follows (in millions):
Years ending December 31,
2013
2014
2015
2016
2017
Thereafter
$
$
14.0
8.3
4.4
2.3
0.6
—
29.6
The Company received approximately $14 million and $20 million of rental income from assets subject to operating leases with
lease terms greater than one year during 2012 and 2011, respectively, none of which represented contingent rental payments.
NOTE I – ACQUISITIONS
2012 Acquisitions
In April 2012, the Company completed a small acquisition in the Cranes segment that had an aggregate purchase price of less than
$11 million. This acquisition did not have a material impact on the Company’s financial results.
2011 Acquisitions
Demag Cranes AG Acquisition
On August 16, 2011, the Company acquired approximately 81% of the shares of Demag Cranes AG at a price of €45.50 per share,
for total cash consideration of approximately $1.1 billion, bringing the Company’s ownership to 82%. Demag Cranes AG is active
in the development, planning, production, distribution, and marketing of industrial cranes and hoists and port technology, as well
as the provision of services in these areas. Demag Cranes AG’s business is highly complementary to the Company’s existing
business both in terms of product and geographical fit. The acquisition of Demag Cranes AG is consistent with the Company’s
strategy to expand its position as a globally active manufacturer of machinery and industrial products in niche market segments.
In January 2012, the Company entered into a Domination and Profit and Loss Transfer Agreement (the “DPLA”) with Demag
Cranes AG. The DPLA was approved by the Demag Cranes AG shareholders on March 16, 2012 and became effective following
registration of the DPLA in the commercial register of Demag Cranes AG. Upon demand from outside shareholders of Demag
Cranes AG, the Company will acquire their shares in return for €45.52 per share. Any outside shareholders of Demag Cranes AG
that choose not to sell their shares to the Company will receive an annual guaranteed payment in the gross amount of €3.33 per
share (€3.04 net per share). See Note P - “Stockholders’ Equity” for a discussion of the financial statement impact of these items.
Net Assets Acquired
The Company has applied purchase accounting to Demag Cranes AG and the results of operations are included in the Company’s
consolidated financial statements following the acquisition date. The application of purchase accounting under ASC 805 requires
the recognition and measurement of the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the
acquiree. The net assets and liabilities of Demag Cranes AG were recorded at their estimated fair value using Level 3 inputs. The
noncontrolling interest was recorded at fair value using Level 1 inputs. See Note A – “Basis of Presentation,” for an explanation
of Level 1 and 3 inputs. In valuing acquired assets and liabilities, fair value estimates are based on, but are not limited to, future
expected cash flows, market rate assumptions for contractual obligations, actuarial assumptions for benefit plans, and appropriate
discount and growth rates. The estimated fair values of assets acquired and liabilities assumed are based on the information that
was available as of the date of this filing to estimate the fair value of assets acquired and liabilities assumed. The Company believes
that such information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed. The
Company finalized the valuation and completed the purchase price adjustments during the period ended September 30, 2012.
F-25
During 2012, the Company made an election, for U.S. tax purposes, to characterize most aspects of the Demag Cranes AG
acquisition as a purchase of assets, rather than as a purchase of shares of Demag Cranes AG. As a result of the U.S. tax election,
a net $38.4 million deferred tax liability related to the investment basis difference was no longer required. Since the deferred tax
liability was recorded in purchase accounting as an increase to goodwill, its elimination was recorded as a reduction to goodwill.
In addition, during 2012, additional measurement period adjustments of $9.8 million related principally to uncertain tax position
amounts and deferred tax liabilities for the investment basis differences in certain Demag Cranes AG subsidiaries were recorded
as an increase to goodwill. The total measurement period adjustment in 2012 to MHPS goodwill for tax-related purchase accounting
items was a decrease of $28.6 million and the Demag Cranes AG acquisition date balance sheet (shown below) and the December
31, 2011 Consolidated Balance Sheet have been adjusted to reflect such decrease.
The fair value of the noncontrolling interest in Demag Cranes AG at the acquisition date was $253.0 million. The valuation
techniques and significant inputs used to measure the fair value of the noncontrolling interest was quoted market prices.
The following table summarizes the estimated fair values of the Demag Cranes AG assets acquired and liabilities assumed and
related deferred income taxes as of acquisition date (in millions).
Assets acquired
Current assets
Trade receivables
Property, plant and equipment
Intangible assets not subject to amortization
Intangible assets subject to amortization
Other assets
Goodwill
Total assets acquired
Liabilities assumed
Current liabilities, including current portion of long-term debt
Long-term debt
Post-employment benefit obligation
Other noncurrent liabilities
Total liabilities assumed
Net assets acquired
$
$
603.4
253.3
308.0
129.7
302.3
131.0
821.5
2,549.2
471.4
169.5
188.9
329.8
1,159.6
1,389.6
Goodwill of $821.5 million, resulting from the acquisition of a majority interest in Demag Cranes AG was assigned to the newly
created MHPS segment. Goodwill consists of intangible assets that do not qualify for separate recognition which includes assembled
workforce. As part of the final valuation of the acquisition, the Company determined which entities and to what extent the benefit
of the acquisition applied and, as required by U.S. GAAP, recorded the appropriate intangibles and goodwill to each entity. With
the exception of tax deductible goodwill existing prior to the acquisition, the purchased intangibles and goodwill are not deductible
for tax purposes. However, purchase accounting allows for the establishment of deferred tax liabilities on purchased intangibles
(other than goodwill) that will be reflected as a tax benefit on the Company’s future Consolidated Statements of Income in proportion
to and over the amortization period of the related intangible asset.
Acquisition-Related Expenses
The Company has incurred transaction costs directly related to the Demag Cranes AG acquisition of $15.8 million for the year
ended December 31, 2011, which is recorded in Other income (expense) – net.
Unaudited Actual and Pro Forma Information
The Company’s consolidated Net sales and Net loss attributable to Terex Corporation from August 16, 2011 through December 31,
2011 includes $617.0 million and $10.2 million, respectively, related to the Demag Cranes AG business.
The following unaudited pro forma information has been presented as if the Demag Cranes AG transaction occurred on January
1, 2010. This information is based on historical results of operations, adjusted for acquisition accounting adjustments, and is not
necessarily indicative of what the results would have been had the Company operated the business since January 1, 2010, nor does
it intend to be a projection of future results. No pro forma adjustments have been made for the Company’s incremental transaction
costs or other transaction-related costs.
F-26
(in millions, except per share data)
Net sales
Net income attributable to Terex Corporation
Basic earnings per share attributable to Terex Corporation common stockholders
Diluted earnings per share attributable to Terex Corporation common stockholders
Year Ended
December 31,
2011
2010
7,414.7 $
6,493.3
33.6 $
0.31 $
0.30 $
352.0
3.24
3.24
$
$
$
$
The fiscal year-ends for the Company and Demag Cranes AG were different. Demag Cranes AG fiscal year end was September 30.
The results of Demag Cranes AG for the 12 month periods ended September 30, 2011 and 2010 were used in these computations.
Other 2011 Acquisitions
In May 2011, the Company completed a small acquisition in the MP segment that had an aggregate purchase price of less than $5
million. In October 2011, the Company completed a small acquisition in the AWP segment that had an aggregate purchase price
of less than $25 million. These acquisitions did not have a material impact on the Company’s financial results.
2010 Acquisitions
The Company completed small acquisitions and investments in consolidated and unconsolidated entities during 2010 in the AWP,
Cranes and MP segments that, taken together, had an aggregate purchase price of less than $35 million. These acquisitions and
investments did not have a material impact on the Company’s financial results either individually or in the aggregate.
NOTE J – GOODWILL AND INTANGIBLE ASSETS, NET
An analysis of changes in the Company’s goodwill by business segment is as follows (in millions):
Cranes
MHPS
MP
Total
Balance at December 31, 2010, gross (1)
Accumulated impairment
Balance at December 31, 2010, net
Acquisitions
Foreign exchange effect and other
Balance at December 31, 2011, gross
Accumulated impairment
Balance at December 31, 2011, net
Acquisitions
Change in control of joint venture (2)
Foreign exchange effect and other
Balance at December 31, 2012, gross
Accumulated impairment
$
AWP
149.6
(42.8)
106.8
6.2
(1.1)
154.7
(42.8)
111.9
0.2
—
—
154.9
(42.8)
$
Construction
438.8
$
(438.8)
—
—
—
438.8
(438.8)
—
—
—
—
438.8
(438.8)
$
191.2
—
191.2
—
(5.7)
185.5
—
185.5
15.5
(4.6)
2.0
198.4
—
$
21.2
—
21.2
821.5
(82.0)
760.7
—
760.7
(4.1)
—
(3.3)
753.3
—
Balance at December 31, 2012, net
$
112.1
$
— $
198.4
$
753.3
$
$
196.9
(23.2)
173.7
1.8
(0.7)
198.0
(23.2)
174.8
—
—
6.7
997.7
(504.8)
492.9
829.5
(89.5)
1,737.7
(504.8)
1,232.9
11.6
(4.6)
5.4
204.7
(23.2)
181.5
$
1,750.1
(504.8)
1,245.3
Includes a $20.5 million reclassification of goodwill from Cranes to MHPS related to segment realignment. See Note A – “Basis of Presentation.”
(1)
(2) On March 1, 2012 the Company reduced its interest in a joint venture and, as a result, deconsolidated the business from its consolidated financial
statements.
F-27
Intangible assets, net were comprised of the following as of December 31, 2012 and 2011 (in millions):
Definite-lived intangible assets:
Technology
Customer Relationships
Land Use Rights
Other
December 31, 2012
December 31, 2011
Weighted
Average
Life
(in years)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
8
15
54
7
$
87.9
$
353.5
17.0
51.9
36.5
78.9
1.1
38.1
$ 51.4
$
67.9
$
274.6
365.8
15.9
13.8
25.9
64.5
17.4
56.0
3.5
44.5
$
50.5
309.8
22.4
20.0
Total definite-lived intangible assets
$ 510.3
$
154.6
$ 355.7
$ 524.1
$
121.4
$ 402.7
Indefinite-lived intangible assets:
Tradenames
Total indefinite-lived intangible assets
$ 118.7
$ 118.7
$ 116.8
$ 116.8
(in millions)
Aggregate Amortization Expense
For the Year Ended December 31,
2012
2011
2010
$
43.0
$
28.9
$
18.3
Estimated aggregate intangible asset amortization expense (in millions) for the next five years is as follows:
2013
2014
2015
2016
2017
$
$
$
$
$
37.6
36.4
35.1
33.6
29.8
The Company recorded measurement period adjustments to the acquisition balance sheet of Demag Cranes AG, which have been
retrospectively adjusted in the December 31, 2011 Consolidated Balance Sheet. See Note I – “Acquisitions,” for more information
on these purchase accounting adjustments.
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. Additionally, the Company entered into derivative contracts that were
intended to partially mitigate risks associated with the shares of common stock of Bucyrus acquired in connection with the sale
of the Mining business and the risks associated with Euro payment for the purchase of Demag Cranes AG. These contracts were
not designated as hedges because they did not meet the requirements for hedge accounting.
The Company operates internationally, with manufacturing and sales facilities in various locations around the world, and uses
certain financial instruments to manage its foreign currency, interest rate and fair value exposures. To qualify a derivative as a
hedge at inception and throughout the hedge period, the Company formally documents the nature and relationships between
hedging instruments and hedged items, as well as its risk-management objectives and strategies for undertaking various hedge
transactions, and the method of assessing hedge effectiveness. Additionally, for hedges of forecasted transactions, the significant
characteristics and expected terms of a forecasted transaction must be specifically identified, and it must be probable that each
forecasted transaction will occur. If it is deemed probable that the forecasted transaction will not occur, then the gain or loss would
be recognized in current earnings. Financial instruments qualifying for hedge accounting must maintain a specified level of
effectiveness between the hedging instrument and the item being hedged, both at inception and throughout the hedged period. The
Company does not engage in trading or other speculative use of financial instruments.
F-28
The Company has used and may use forward contracts and options to mitigate its exposure to changes in foreign currency exchange
rates on third party and intercompany forecasted transactions. The primary currencies to which the Company is exposed are the
Euro, British Pound and Australian Dollar. The effective portion of unrealized gains and losses associated with forward contracts
and the intrinsic value of option contracts are deferred as a component of Accumulated other comprehensive income until the
underlying hedged transactions are reported in the Company’s Consolidated Statement of Income. The Company uses interest
rate swaps to mitigate its exposure to changes in interest rates related to existing issuances of variable rate debt and to fair value
changes of fixed rate debt. Primary exposure includes movements in the London Interbank Offer Rate (“LIBOR”).
Changes in the fair value of derivatives designated as fair value hedges are recognized in earnings as offsets to changes in fair
value of exposures being hedged. The change in fair value of derivatives designated as cash flow hedges are deferred in
Accumulated other comprehensive income and are recognized in earnings as hedged transactions occur. Contracts deemed
ineffective are recognized in earnings immediately.
In the Consolidated Statement of Income, the Company records hedging activity related to debt instruments in interest expense
and hedging activity related to foreign currency in the accounts for which the hedged items are recorded. On the Consolidated
Statement of Cash Flows, the Company records cash flows from hedging activities in the same manner as it records the underlying
item being hedged.
In November 2007, the Company entered into an interest rate swap agreement that converted a fixed rate interest payment into a
variable rate interest payment. In November 2012, this interest rate swap agreement was terminated. Furthermore, as discussed
in Note M – “Long-Term Obligations,” the Company redeemed the 8% Senior Subordinated notes associated with this swap and
therefore, as a result of the termination and redemption, recorded a gain of approximately $16 million which decreased the Loss
on early extinguishment of debt associated with the redemption.
The Company had entered into a prior interest rate swap agreement that converted a fixed rate interest payment into a variable
rate interest payment. At December 31, 2006, the Company had $200.0 million notional amount of this interest rate swap agreement
outstanding, which would have matured in 2014. To maintain an appropriate balance between floating and fixed rate obligations
on its mix of indebtedness, the Company exited this interest rate swap agreement on January 15, 2007 and paid $5.4 million. This
loss was recorded as an adjustment to the carrying value of the hedged debt and was amortized through January 15, 2011, which
was the effective date that the hedged debt was extinguished.
The Company is also a party to currency exchange forward contracts that generally mature within one year to manage its exposure
to changing currency exchange rates. At December 31, 2012, the Company had $579.0 million notional amount of currency
exchange forward contracts outstanding, most of which mature on or before December 31, 2013. The fair market value of these
contracts at December 31, 2012 was a net loss of $0.4 million. At December 31, 2012, $462.5 million notional amount ($0.1
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 2012 and 2011, the Company recorded the change in fair value for these cash flow
hedges to Accumulated other comprehensive income and reclassified to earnings a portion of the deferred gain or loss from
Accumulated other comprehensive income as the hedged transactions occurred and were recognized in earnings.
The Company records the interest rate swap and foreign exchange contracts at fair value on a recurring basis. The interest rate
swap was categorized under Level 2 of the ASC 820 hierarchy and was recorded at December 31, 2011 as an asset of $33.4
million. The foreign exchange contracts designated as hedging instruments are categorized under Level 1 of the ASC 820 hierarchy
and are recorded at December 31, 2012 and 2011 as a liability of $0.4 million and $5.9 million, respectively. See Note A – “Basis
of Presentation,” for an explanation of the ASC 820 hierarchy. The fair values of these foreign exchange forward contracts are
based on quoted forward foreign exchange prices at the reporting date. The fair value of the interest rate swap agreement is based
on LIBOR yield curves at the reporting date. The fair values of these contracts are based on the contract rate specified at the
anticipated contracts’ settlement date and quoted forward foreign exchange prices at the reporting date.
The Company entered into a stockholders agreement with Bucyrus that contained certain restrictions, including providing for
Terex’s commitment that it would not directly or indirectly sell or otherwise transfer its economic interest in the shares of Bucyrus
stock received by it for a period of one year, subject to certain exceptions. As a result, in order to partially mitigate the risks
associated with the shares of Bucyrus stock, the Company entered into derivative contracts using a basket of stocks whose prices
had historically been highly correlated with the Bucyrus stock price. During the year ended December 31, 2010, the Company
paid premiums of approximately $21 million to enter into derivative trades to mitigate the risk of approximately 95% of the notional
value of the Bucyrus stock based on historic prices. The one year lock-up contained in the stockholders agreement expired on
February 19, 2011. All of the derivative contracts purchased by the Company expired unexercised during the year ended
December 31, 2011. The Company recognized $0.3 million loss in Other income (expense) – net on the Consolidated Statement
of Income related to these derivative contracts for the year ended December 31, 2011.
F-29
The Company entered into contingent participating forward foreign currency contracts to purchase up to €450.0 million in May
2011 in connection with the acquisition of Demag Cranes AG to hedge against its exposure to changes in the exchange rate for
the Euro, as the acquisition purchase price was paid in Euros. Such contracts were not designated as hedging instruments. The
contingent participating forward foreign currency contracts were settled during the year ended December 31, 2011, resulting in a
loss of $16.1 million recorded in Other income (expense) – net in the Statement of Income.
The Company’s MHPS segment uses forward foreign exchange contracts to mitigate its exposure to changes in foreign currency
exchange rates on third party and intercompany forecasted transactions. Certain of these contracts have not been designated as
hedging instruments. The foreign exchange contracts are accounted for as financial assets or financial liabilities and measured at
fair value at the balance sheet date and are categorized under Level 1 of the ASC 820 hierarchy. The fair values of these foreign
exchange forward contracts are based on quoted forward foreign exchange prices at the reporting date. Changes in the fair value
of derivative financial instruments are recognized as gains or losses in Cost of goods sold in the Consolidated Statement of Income.
The following table provides the location and fair value amounts of derivative instruments designated as hedging instruments that
are reported in the Consolidated Balance Sheet (in millions):
Asset Derivatives
Foreign exchange contracts
Interest rate contract
Total asset derivatives
Liability Derivatives
Foreign exchange contracts
Interest rate contract
Total liability derivatives
Total Derivatives
Balance Sheet Account
Other current assets
Other assets
Other current liabilities
Long-term debt, less current portion
December 31,
2012
December 31,
2011
$
$
$
$
$
$
$
$
5.2
—
5.2
5.6
—
5.6
$
(0.4) $
7.1
33.4
40.5
13.0
33.4
46.4
(5.9)
The following table provides the location and fair value amounts of derivative instruments not designated as hedging instruments
that are reported in the Consolidated Balance Sheet (in millions):
Asset Derivatives
Foreign exchange contracts
Balance Sheet Account
Other current assets
December 31,
2012
December 31,
2011
$
1.0
$
0.7
F-30
The following tables provide the effect of derivative instruments that are designated as hedges in the Consolidated Statement of
Income and Accumulated other comprehensive income (“OCI”) (in millions):
Gain Recognized on Derivatives in Income:
Fair Value Derivatives
Interest rate contract
Interest rate contract
Total
(Loss) Gain Recognized on Derivatives in OCI:
Cash Flow Derivatives
Foreign exchange contracts
Location
Interest expense
Loss on early extinguishment of debt
(Loss) Gain Reclassified from Accumulated OCI into Income (Effective):
Account
Cost of goods sold
Other income (expense) – net
Total
Gain (Loss) Recognized on Derivatives (Ineffective) in Income:
Account
Other income (expense) – net
Year Ended
December 31,
2012
2011
19.3
—
19.3
16.3
16.0
32.3
$
$
$
Year Ended
December 31,
2012
2011
3.2
$
(1.6)
Year Ended
December 31,
2012
2011
(4.7)
(0.8)
(5.5)
(5.2) $
(5.1)
(10.3) $
Year Ended
December 31,
2012
2011
4.9
$
1.5
$
$
$
$
$
$
$
The following table provides the effect of derivative instruments that are not designated as hedges in the Consolidated Statements
of Income and Comprehensive Income (in millions):
Gain (Loss) Recognized on Derivatives not designated as hedges in Income:
Account
Cost of Goods Sold
Other income (expense) – net
Total
Year Ended
December 31,
2012
2011
$
$
$
(0.8) $
— $
(0.8) $
0.5
(16.4)
(15.9)
Counterparties to the Company’s interest rate swap agreement and currency exchange forward contracts are major financial
institutions with credit ratings of investment grade or better and no collateral is required. There are no significant risk
concentrations. Management continues to monitor counterparty risk and believes the risk of incurring losses on derivative contracts
related to credit risk is unlikely and any losses would be immaterial.
Unrealized net gains (losses), net of tax, included in OCI are as follows (in millions):
Balance at beginning of period
Additional gains (losses) – net
Amounts reclassified to earnings
Balance at end of period
Year Ended December 31,
2012
2011
2010
$
$
(3.6) $
(1.9)
5.1
(0.4) $
(2.1) $
(2.3)
0.8
(3.6) $
(3.6)
(2.0)
3.5
(2.1)
The estimated amount of existing losses for derivative contracts recorded in OCI as of December 31, 2012 that are expected to
be reclassified into earnings in the next twelve months is $0.4 million.
F-31
NOTE L – RESTRUCTURING AND OTHER CHARGES
The Company continually evaluates its cost structure to be appropriately positioned to respond to changing market conditions.
Given economic trends in recent years, the Company initiated certain restructuring programs to better utilize its workforce and
optimize facility utilization to match the demand for its products.
To optimize facility utilization, the Company established a restructuring program to move its crushing and screening manufacturing
business within the MP segment from Cedar Rapids, Iowa to other facilities, primarily in North America. Engineering, sales and
service functions for materials processing equipment currently made at the plant will be retained at the facility for the near future.
The program cost $5.7 million, resulted in reductions of 186 team members and was completed in 2011. Costs of $2.3 million
and $0.1 million were charged to Cost of goods sold (“COGS”) and selling, general and administrative costs (“SG&A”),
respectively, in the year ended December 31, 2011 for this program. The program was completed in 2011.
The Company established a restructuring program within the MP segment to realize cost synergies and support its joint brand
strategy by consolidating certain of its crushing equipment manufacturing businesses. This program resulted in the relocation of
its crusher manufacturing operations in Coalville, England to Omagh, Northern Ireland. The global design center for crushing
equipment and certain component manufacturing was retained at Coalville. The program was completed in 2011. The Company
has subsequently revised its plans for this site and intends to invest in its design and engineering team and re-implement
manufacturing based at this location. The Coalville facility will become the MP center for research and development, with
responsibility for providing new and innovative products. As a result of these revised plans, $2.4 million of restructuring reserve
was reversed in the year ended December 31, 2012.
The Company established a restructuring program in the Construction segment related to its compact construction operations in
Germany to concentrate the segment on its core processes and competencies. This program is expected to result in the sale, closure
or phase-out of several businesses in Germany. The program is expected to cost $11.7 million, result in the reduction of 368 team
members and be completed in 2013. Costs of $4.9 million and $6.8 million were charged to COGS and SG&A, respectively, in
the year ended December 31, 2012.
The Company established a restructuring program in the MHPS segment to realize cost synergies and to optimize the SG&A
expense structure. This program resulted in the closing of a production site in Spain and outsourcing of the related future production.
The program is expected to cost $3.0 million, result in the reduction of approximately 26 team members and is expected to be
completed in 2013. Costs of $2.5 million and $0.5 million were charged to COGS and SG&A, respectively, in the year ended
December 31, 2012.
During the second quarter of 2011, the Company established restructuring programs within the MHPS segment to optimize facility
utilization and consolidate certain manufacturing operations. These programs are expected to cost $25.6 million and result in the
reduction of approximately 206 team members. This program was completed in 2012, except for certain benefits mandated by
governmental agencies.
During the third quarter of 2011, the Company reorganized certain areas within the Construction segment to enhance operational
efficiency. The program cost $1.4 million, resulted in the reduction of approximately 5 team members and was completed in 2012.
During the third quarter of 2011, certain areas of the MHPS segment were reorganized to better utilize the Company’s workforce.
The program cost $0.9 million, resulted in the reduction of approximately 6 team members and was completed in 2012.
During the second quarter of 2012, the Company closed a parts distribution center in its Construction segment. The program cost
$0.3 million, resulted in the reduction of approximately 9 team members and was completed in 2012.
F-32
The following table provides information for all restructuring activities by segment of the amount of expense incurred during the
year ended December 31, 2012, the cumulative amount of expenses incurred since inception of the programs and the total amount
expected to be incurred (in millions):
AWP
Construction
Cranes
MP
MHPS
Corporate and Other
Total
Amount incurred
during the year ended
December 31, 2012
Cumulative amount
incurred through
December 31, 2012
Total amount expected
to be incurred
$
$
— $
12.1
(0.3)
(2.1)
2.2
—
$
23.7
50.9
5.5
11.5
38.6
6.2
23.7
50.9
5.5
11.5
38.6
6.2
11.9
$
136.4
$
136.4
The following table provides information by type of restructuring activity with respect to the amount of expense incurred during
the year ended December 31, 2012, the cumulative amount of expenses incurred since inception of the programs and the total
amount expected to be incurred (in millions):
Amount incurred in the year ended December 31, 2012
Cumulative amount incurred through December 31, 2012
Total amount expected to be incurred
Employee
Termination
Costs
$
$
$
5.8
98.0
98.0
$
$
$
Facility
Exit Costs
Asset Disposal
and Other Costs
Total
(0.6) $
$
17.1
17.1
$
6.7
21.3
21.3
$
$
$
11.9
136.4
136.4
The following table provides a roll forward of the restructuring reserve by type of restructuring activity for the year ended
December 31, 2012 (in millions):
Restructuring reserve at December 31, 2011
Restructuring charges
Cash expenditures
Restructuring reserve at December 31, 2012
Employee
Termination
Costs
Facility
Exit Costs
Asset Disposal
and Other
Costs
Total
$
$
20.0
$
4.8
(7.7)
17.1
$
1.2
(0.8)
(0.2)
0.2
$
$
(0.4) $
0.3
0.1
— $
20.8
4.3
(7.8)
17.3
During the years ended December 31, 2012 and 2011, $8.4 million and $19.1 million, respectively, of restructuring charges were
included in COGS. During the years ended December 31, 2012 and 2011, $3.5 million and $10.4 million, respectively, of
restructuring charges were included in SG&A costs. Included in the restructuring costs for the years ended December 31, 2012
and 2011 are $5.7 million and $8.8 million of asset impairments, respectively.
F-33
NOTE M – LONG-TERM OBLIGATIONS
Long-term debt is summarized as follows (in millions):
6-1/2% Senior Notes due April 1, 2020
6% Senior Notes due May 15, 2021
10-7/8% Senior Notes due June 1, 2016
4% Convertible Senior Subordinated Notes due June 1, 2015
8% Senior Subordinated Notes due November 15, 2017
2011 Credit Agreement – term debt
Demag Cranes AG Credit Agreement
Capital lease obligations
Other
Total debt
Less: Notes payable and current portion of long-term debt
Long-term debt, less current portion
2011 Credit Agreement
December 31,
2012
2011
300.0
850.0
—
109.2
—
710.1
—
5.8
123.6
2,098.7
(83.8)
2,014.9
$
$
—
—
295.5
137.3
800.0
710.8
173.7
2.1
181.0
2,300.4
(77.0)
2,223.4
$
$
The Company entered into an amended and restated credit agreement (the “2011 Credit Agreement”) on August 5, 2011, with the
lenders party thereto and Credit Suisse AG, as administrative agent and collateral agent. The 2011 Credit Agreement replaced the
Company’s credit agreement dated as of July 14, 2006 (“2006 Credit Agreement”), as amended. The 2006 Credit Agreement was
terminated as of August 11, 2011.
The 2011 Credit Agreement provided the Company with a $460.1 million term loan and a €200.0 million term loan. The proceeds
of the term loans were used, along with other cash, to pay for the shares of Demag Cranes AG and related fees and expenses. The
term loans are scheduled to mature on April 28, 2017.
In addition, the 2011 Credit Agreement provides the Company with a revolving line of credit of up to $500 million. The revolving
line of credit consists of $250 million of available domestic revolving loans and $250 million of available multicurrency revolving
loans. The revolving lines of credit are scheduled to mature on April 29, 2016.
On October 12, 2012, the Company and its lenders entered into an amendment of the 2011 Credit Agreement (the “Amendment”).
As a result of the Amendment, the Company reduced the interest rates on its U.S. Dollar and Euro denominated term loans.
Additionally, the Amendment also provided greater flexibility for the Company (i) for complying with its financial covenants, (ii)
in issuing additional debt under the credit agreement and (iii) in the Company's covenant baskets for additional letter of credit
facilities, maximum letter of credit exposure, acquired debt, foreign subsidiary debt, general debt, restricted payments, receivables
transactions and prepayment of other debt. As a result of this amendment the Company recorded a loss on early extinguishment
of debt of $1.9 million in the consolidated statement of income for the year ended December 31, 2012 which included non-cash
charges for accelerated amortization of debt acquisition costs and original issue discount. In preparing the consolidated Statement
of Cash Flows these non-cash items were added to net income.
The 2011 Credit Agreement allows unlimited 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 the Company
satisfies a secured debt financial ratio contained in the credit facilities.
The 2011 Credit Agreement requires the Company to comply with a number of covenants. These covenants require the Company
to meet certain financial tests. The minimum required levels of the interest coverage ratio, as defined in the 2011 Credit Agreement,
shall be 2.5 to 1.00. The maximum permitted levels of the senior secured leverage ratio, as defined in the 2011 Credit Agreement,
shall be to 2.5 to 1.00.
F-34
The covenants also limit, in certain circumstances, the Company’s ability to take a variety of actions, including: incur indebtedness;
create or maintain liens on its property or assets; make investments, loans and advances; repurchase shares of its Common Stock;
engage in acquisitions, mergers, consolidations and asset sales; redeem debt; and pay dividends and distributions. The 2011 Credit
Agreement also contains customary default provisions. The Company’s future compliance with its financial covenants under the
2011 Credit Agreement will depend on its ability to generate earnings and manage its assets effectively. The 2011 Credit Agreement
also has various non-financial covenants, both requiring the Company to refrain from taking certain future actions (as described
above) and requiring the Company to take certain actions, such as keeping in good standing its corporate existence, maintaining
insurance, and providing its bank lending group with financial information on a timely basis.
As of December 31, 2012 and 2011, the Company had $710.1 million and $710.8 million, respectively, in U.S. dollar and Euro
denominated term loans outstanding under the 2011 Credit Agreement. The Company had no revolving credit amounts outstanding
as of December 31, 2012 and 2011.
The 2011 Credit Agreement incorporates facilities for issuance of letters of credit up to $300 million. Letters of credit issued
under the 2011 Credit Agreement letter of credit facility decrease availability under the $500 million revolving line of credit. As
of December 31, 2012 and 2011, the Company had letters of credit issued under the 2011 Credit Agreement that totaled $45.4
million and $61.8 million, respectively. The 2011 Credit Agreement also permits the Company to have additional letter of credit
facilities up to $200 million, and letters of credit issued under such additional facilities do not decrease availability under the
revolving line of credit. As of December 31, 2012 and 2011, the Company had letters of credit issued under the additional letter
of credit facilities of the 2011 Credit Agreement that totaled $3.1 million and $1.0 million, respectively.
The Company also has bilateral arrangements to issue letters of credit with various other financial institutions. These additional
letters of credit do not reduce the Company’s availability under the 2011 Credit Agreement. The Company had letters of credit
issued under these additional arrangements of $275.5 million and $114.6 million as of December 31, 2012 and 2011, respectively.
In total, as of December 31, 2012 and 2011, the Company had letters of credit outstanding of $324.0 million and $289.3 million,
respectively. Letters of credit outstanding at December 31, 2011 included $111.9 million outstanding under the Demag Cranes
AG credit agreement which was terminated on May 21, 2012.
The Company and certain of its subsidiaries agreed to take certain actions to secure borrowings under the 2011 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 2011 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.
Demag Cranes AG Credit Agreement
Following the effectiveness of the DPLA, the lenders under the Demag Cranes AG Credit Agreement exercised their option to
terminate the agreement. The Company repaid all €135 million debt outstanding on May 11, 2012 and provided bank guarantees
or cash collateral to support any letters of credit outstanding under the facility by May 21, 2012. The facility was terminated on
May 21, 2012.
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, including cash requirements resulting
from the effectiveness of the DPLA. The 6-1/2% Notes are redeemable by the Company beginning in April 2016 at an initial
redemption price of 103.25% of principal amount. The 6-1/2% Notes are jointly and severally guaranteed by certain of the
Company’s domestic subsidiaries (see Note R – “Consolidating Financial Statements”).
6% Senior Notes
On November 26, 2012, the Company sold and issued $850 million aggregate principal amount of Senior Notes due 2021 (“6%
Notes”) at par. The proceeds from this offering plus other cash was used to redeem all $800 million principal amount of the
outstanding 8% Notes. The 6% Notes are redeemable by the Company beginning in November 2016 at an initial redemption
price of 103.00% of principal amount. The 6% Notes are jointly and severally guaranteed by certain of the Company’s domestic
subsidiaries (see Note R – “Consolidating Financial Statements”).
F-35
10-7/8% Senior Notes
On June 3, 2009, the Company sold and issued $300 million aggregate principal amount of Senior Notes Due 2016 (“10-7/8%
Notes”) at 97.633%. The Company used a portion of the approximately $293 million proceeds from the offering of the 10-7/8%
Notes, together with a portion of the proceeds from the 4% Convertible Notes discussed below, to prepay a portion of its term
loans under the 2006 Credit Agreement and to pay off the outstanding balance under the revolving credit component of the 2006
Credit Agreement. The 10-7/8% Notes were redeemable by the Company beginning in June 2013 at an initial redemption price
of 105.438% of principal amount.
On September 28, 2012, the Company repaid the outstanding $299.9 million principal amount of its 10-7/8% Notes. The total
cash paid to redeem the 10-7/8% Notes was $347.3 million which included a make whole call premium of 12.265%, totaling $36.8
million plus accrued and unpaid interest of $10.6 million at the redemption date.
The Company recorded a loss on early extinguishment of debt of $42.9 million in the Consolidated Statement of Income for the
year ended December 31, 2012, which includes (a) cash payments of $36.8 million for call premiums associated with the repayment
of $299.9 million of outstanding debt and (b) $6.1 million of non-cash charges for accelerated amortization of debt acquisition
costs related to the redemption of the 10-7/8% Notes, and original issue discount, which all flow into the calculation of net income.
In preparing the Consolidated Statement of Cash Flows, the non-cash item (b) was added to net income to reflect cash flow
appropriately.
4% Convertible Senior Subordinated Notes
On June 3, 2009, the Company sold and issued $172.5 million aggregate principal amount of 4% Convertible Notes. In certain
circumstances and during certain periods, the 4% Convertible Notes will be convertible at an initial conversion rate of 61.5385
shares of Common Stock per $1,000 principal amount of convertible notes, equivalent to an initial conversion price of approximately
$16.25 per share of Common Stock, subject to adjustment in some events. Upon conversion, Terex will deliver cash up to the
aggregate principal amount of the 4% Convertible Notes to be converted and shares of Common Stock with respect to the remainder,
if any, of Terex’s convertible obligation in excess of the aggregate principal amount of the 4% Convertible Notes being converted.
As a result of the Company’s redemption of the 7-3/8% Notes, as of February 7, 2011, the 4% Convertible Notes are jointly and
severally guaranteed by certain of the Company’s domestic subsidiaries (see Note R – “Consolidating Financial Statements”).
The Company, as issuer of the 4% Convertible Notes, must separately account for the liability and equity components of the 4%
Convertible Notes in a manner that reflects the Company’s nonconvertible debt borrowing rate at the date of issuance when interest
cost is recognized in subsequent periods. The Company allocated $54.3 million of the $172.5 million principal amount of the 4%
Convertible Notes to the equity component, which represents a discount to the debt and will be amortized into interest expense
using the effective interest method through June 2015. The Company recorded a related deferred tax liability of $19.4 million on
the equity component.
In the third quarter of 2012, the Company purchased approximately 25% of the principal amount outstanding of its 4% Convertible
Notes due 2015 for approximately $64 million, including $0.3 million of accrued interest. These purchases reduced the balance
of the 4% Convertible Notes outstanding by $36.1 million and reduced equity by $19.1 million. The Company recorded a loss
on early retirement of debt in the Consolidated Statement of Income of $6.5 million for the year ended December 31, 2012, which
includes (a) cash payments of $5.9 million for debt principal over book value and (b) $0.6 million for non-cash charges for
accelerated amortization of debt issuance costs.
The balance of the 4% Convertible Notes was $109.2 million at December 31, 2012 reflecting the impact of the purchase discussed
above. The Company recognized interest expense of $14.2 million on the 4% Convertible Notes for the year ended December 31,
2012. The interest expense recognized for the 4% Convertible Notes will increase as the discount is amortized using the effective
interest method, which accretes the debt balance over its term to $128.8 million at maturity. Interest expense on the 4% Convertible
Notes throughout its term includes 4% annually of cash interest on the maturity balance of $128.8 million plus non-cash interest
expense accreted to the debt balance as described.
8% Senior Subordinated Notes
On November 13, 2007, the Company sold and issued $800 million aggregate principal amount of 8% Notes. The 8% Notes were
redeemable by the Company beginning in November 2012 at an initial redemption price of 104.000% of principal amount.
F-36
In the fourth quarter of 2012, the Company used the net proceeds from the 6% Notes offering plus other cash to redeem, via tender
and subsequent call, all $800 million principal amount of its outstanding 8% Notes. Total cash paid to redeem the 8% Notes was
$837.3 million and included tender/call premiums of $34.6 million and accrued interest of $2.7 million.
The Company recorded a loss on early extinguishment of debt of $28.7 million in the Consolidated Statement of Income for the
year ended December 31, 2012, which includes (a) cash payments of $35.4 million for call premiums and other expenses associated
with the repayment of outstanding debt, (b) $9.3 million of non-cash charges for accelerated amortization of debt acquisition costs
related to the redemption of the 8% Notes and (c) $16.0 million of gain related to the termination of the swap agreement associated
with the redemption of the Notes, which all flow into the calculation of net income. In preparing the Consolidated Statement of
Cash Flows, the non-cash item (b) was added to net income and the swap termination item (c) was added to Loss on early
extinguishment of debt, to reflect cash flow appropriately.
7-3/8% Senior Subordinated Notes
On November 25, 2003, the Company sold and issued $300 million aggregate principal amount of 7-3/8% Notes discounted to
yield 7-1/2%. The 7-3/8% Notes were jointly and severally guaranteed by certain domestic subsidiaries of the Company (see Note
R – “Consolidating Financial Statements”). The 7-3/8% Notes were redeemable by the Company beginning in January 2009 at
an initial redemption price of 103.688% of principal amount. On January 18, 2011, the Company exercised its early redemption
option and repaid the outstanding $297.6 million principal amount of its 7-3/8% Notes. The total cash paid to redeem the 7-3/8%
Notes was $312.3 million that included a call premium of 1.229% as set forth in the indenture for the 7-3/8% Notes, totaling $3.6
million plus accrued and unpaid interest of $36.875 per $1,000 principal amount at the redemption date.
The $7.7 million in the Consolidated Statement of Income for the year ended December 31, 2011 includes (a) cash payments of
$3.6 million for call premiums associated with the repayment of $297.6 million of outstanding debt and (b) $4.1 million of non-
cash charges for accelerated amortization of debt acquisition costs related to the redemption of the 7-3/8% notes and termination
of the 2006 Credit Agreement, original issue discount and loss on a terminated swap associated with the outstanding debt, which
all flow into the calculation of Net income. In preparing the Consolidated Statement of Cash Flows, the non-cash item (b) was
added to Net income to reflect cash flow appropriately.
Schedule of Debt Maturities
Scheduled annual maturities of the principal portion of long-term debt outstanding at December 31, 2012 in the successive five-
year period are summarized below. Amounts shown are exclusive of minimum lease payments for capital lease obligations
disclosed in Note N – “Lease Commitments” (in millions):
2013
2014
2015
2016
2017
Thereafter
Total
$
$
82.8
48.2
118.7
10.9
435.4
1,396.9
2,092.9
Based on indicative price quotations from financial institutions multiplied by the amount recorded on the Company’s Consolidated
Balance Sheet (“Book Value”), the Company estimates the fair values (“FV”) of its debt set forth below as of December 31, 2012,
as follows (in millions, except for quotes):
2012
Book Value
6-1/2% Notes
6% Notes
4% Convertible Notes (net of discount)
2011 Credit Agreement Term Loan (net of discount) – USD
2011 Credit Agreement Term Loan (net of discount) – EUR
$
$
$
$
$
300.0
850.0
109.2
451.0
259.1
$
$
$
$
$
Quote
1.06250
1.05250
1.83000
1.01000
1.00000
$
$
$
$
$
FV
319
895
200
456
259
F-37
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 approximates fair market value based
on maturities for debt of similar terms. The fair value of these other borrowings are categorized under Level 2 of the ASC 820
hierarchy.
2011
Book Value
8% Notes
4% Convertible Notes (net of discount)
10-7/8% Notes
2011 Credit Agreement Term Loan (net of discount) – USD
2011 Credit Agreement Term Loan (net of discount) – EUR
$
$
$
$
$
800.0
137.3
295.5
454.7
256.1
$
$
$
$
$
Quote
0.96500
1.11000
1.10500
1.00250
0.99000
$
$
$
$
$
FV
772
152
327
456
254
The Company believes that the carrying value of its other borrowings approximates fair market value based on discounted future
cash flows using rates currently available for debt of similar terms and remaining maturities.
The Company paid $156.0 million, $134.4 million and $136.7 million of interest in 2012, 2011 and 2010, respectively.
NOTE N – LEASE COMMITMENTS
The Company leases certain facilities, machinery, equipment and vehicles with varying terms. Under most leasing arrangements,
the Company pays the property taxes, insurance, maintenance and expenses related to the leased property. Certain of the equipment
leases are classified as capital leases and the related assets have been included in Property, Plant and Equipment. Net assets under
capital leases were $13.2 million and $9.0 million, net of accumulated amortization of $4.1 million and $2.6 million, at
December 31, 2012 and 2011, respectively.
Future minimum capital and noncancellable operating lease payments and the related present value of capital lease payments at
December 31, 2012 are as follows (in millions):
2013
2014
2015
2016
2017
Thereafter
Total minimum obligations
Less: amount representing interest
Present value of net minimum obligations
Less: current portion
Long-term obligations
Capital
Leases
Operating
Leases
62.2
52.3
42.0
31.7
23.5
59.4
271.1
$
$
$
$
1.0
1.0
0.6
0.5
0.5
2.6
6.2
(0.4)
5.8
(0.9)
4.9
Most of the Company’s operating leases provide the Company with the option to renew the leases for varying periods after the
initial lease terms. These renewal options enable the Company to renew the leases based upon the fair rental values at the date of
expiration of the initial lease. Total rental expense under operating leases was $80.4 million, $62.1 million, and $55.7 million in
2012, 2011 and 2010, respectively.
NOTE O – RETIREMENT PLANS AND OTHER BENEFITS
Pension Plans
U.S. Plan – As of December 31, 2012, the Company maintained one qualified defined benefit pension plan covering certain
domestic employees (the “Terex Plan”). Participation in the Terex Plan for all employees has been frozen. Participants are credited
with post-freeze service for purposes of determining vesting and retirement eligibility only. The benefits covering salaried
employees are based primarily on years of service and employees’ qualifying compensation during the final years of employment.
F-38
The benefits covering bargaining unit employees are based primarily on years of service and a flat dollar amount per year of
service. It is the Company’s policy generally to fund the Terex Plan based on the requirements of the Employee Retirement Income
Security Act of 1974 (“ERISA”). Plan assets consist primarily of common stocks, bonds and short-term cash equivalent funds.
The Company maintains a nonqualified Supplemental Executive Retirement Plan (“SERP”). The SERP provides retirement
benefits to certain senior executives of the Company. Generally, the SERP provides a benefit based on average total compensation
earned over a participant’s final five years of employment and years of service reduced by benefits earned under any Company
retirement program, excluding salary deferrals and matching contributions. In addition, benefits are reduced by Social Security
Primary Insurance Amounts attributable to Company contributions. The SERP is unfunded and participation in the SERP has
been frozen. There is a defined contribution plan for certain senior executives of the Company.
During July 2012, the Moving Ahead for Progress in the 21st Century Act (“MAP 21”) was enacted in the U.S. MAP 21 provides
short-term relief of minimum contribution requirements by increasing the interest rates used to value pension liabilities beginning
January 1, 2012 and increases the premiums due to the Pension Benefit Guaranty Corporation beginning in 2013 through 2015.
As a result of the enactment of MAP 21, and existing funding commitments, there were no minimum contribution requirements
for the 2012 plan year.
Other Postemployment Benefits
The Company has several non-pension post-retirement benefit programs. The Company provides postemployment health and life
insurance benefits to certain former salaried and hourly employees. The health care programs are contributory, with participants’
contributions adjusted annually, and the life insurance plan is noncontributory.
Information regarding the Company’s U.S. plan, including the SERP, was as follows (in millions, except percent values):
Accumulated benefit obligation at end of year
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contribution
Benefits paid
Fair value of plan assets at end of year
Funded status
Amounts recognized in the statement of financial position
consist of:
Current liabilities
Non-current liabilities
Total liabilities
Amounts recognized in accumulated other comprehensive
income consist of:
Actuarial net loss
Prior service cost
Total amounts recognized in accumulated other
comprehensive income
$
$
$
$
$
$
$
F-39
Pension Benefits
Other Benefits
2012
2011
2012
2011
$
$
175.2
185.1
1.2
7.2
(0.8)
(10.4)
182.3
111.4
14.8
7.8
(10.4)
123.6
(58.7) $
173.6
159.9
$
2.1
8.2
24.7
(9.8)
185.1
99.3
7.1
14.8
(9.8)
111.4
(73.7) $
$
8.0
—
0.3
0.2
(0.9)
7.6
—
—
0.9
(0.9)
—
(7.6) $
0.2
58.5
58.7
$
$
0.1
73.6
73.7
$
$
1.1
6.5
7.6
80.1
$
91.7
$
0.9
1.0
2.4
(0.1)
$
$
$
10.3
—
0.4
(1.4)
(1.3)
8.0
—
—
1.3
(1.3)
—
(8.0)
1.2
6.8
8.0
2.5
(0.1)
81.0
$
92.7
$
2.3
$
2.4
Pension Benefits
Other Benefits
2012
2011
2010
2012
2011
2010
Weighted-average assumptions as of December 31:
Discount rate
Expected return on plan assets
Rate of compensation increase
3.75%
7.50%
3.75%
4.00%
8.00%
3.75%
5.25%
8.00%
3.75%
3.75%
4.00%
5.25%
N/A
N/A
N/A
N/A
N/A
N/A
Components of net periodic cost:
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Net periodic cost
Pension Benefits
Other Benefits
2012
2011
2010
2012
2011
2010
$
1.2
$
2.1
$
2.0
$
— $
— $
7.2
(8.8)
0.1
4.8
4.5
$
8.2
(8.3)
0.2
3.3
5.5
$
8.4
(7.3)
1.9
1.7
6.7
$
0.3
—
—
0.2
0.5
$
0.4
—
—
—
$
0.4
$
—
0.6
—
0.1
0.1
0.8
Pension Benefits
Other Benefits
2012
2011
2012
2011
Other Changes in Plan Assets and Benefit Obligations Recognized in
Other Comprehensive Income:
Net (gain) loss
Amortization of actuarial losses
Amortization of prior service cost
Total recognized in other comprehensive income
$
$
(6.8) $
(4.8)
(0.1)
(11.7) $
25.9
(3.3)
(0.2)
22.4
Amounts expected to be recognized as components of net periodic cost for the year ending
December 31, 2013:
Actuarial net loss
Prior service cost
Total amount expected to be recognized as components of net periodic cost for the year ending
December 31, 2013
$
$
$
$
$
0.2
(0.2)
—
— $
(1.4)
—
—
(1.4)
Pension
Benefits
Other
Benefits
$
3.9
0.1
4.0
$
0.2
—
0.2
For U.S. pension plans, including the SERP, that have accumulated benefit obligations in excess of plan assets, the projected
benefit obligation, accumulated benefit obligation, and fair value of plan assets were $182.3 million, $175.2 million and $123.6
million, respectively, as of December 31, 2012, and $185.1 million, $173.6 million and $111.4 million, respectively, as of
December 31, 2011.
Determination of plan obligations and associated expenses requires the use of actuarial valuations based on certain economic
assumptions, which includes discount rates and expected rates of returns on plan assets. The discount rate enables the Company
to estimate the present value of expected future cash flows on the measurement date. The rate used reflects a rate of return on
high-quality fixed income investments that matches the duration of expected benefit payments at the December 31 measurement
date.
The rate used for the expected return on plan assets is based on a review of long-term historical asset performances aligned with
the Company’s investment strategy and portfolio mix. While the Company examines performance annually, it also views historic
asset portfolios and performance over a long period of years before recommending a change. In the short term, there may be
fluctuations of positive and negative yields year-over-year, but over the long-term, the return is expected to be approximately
7.5%.
F-40
The Company’s overall investment strategy for the U.S. defined benefit plan balances two objectives, investing in fixed income
securities whose maturity broadly matches the maturity of the pension liabilities and investing in equities and other assets expected
to generate higher returns. The Company invests through a number of investment funds with diversified asset types, strategies
and managers. Equity securities, including investments in large to small-cap companies in the U.S. and internationally, constitute
approximately 33.8% of the portfolio. Fixed income securities including corporate bonds of companies from diversified industries,
U.S. Treasuries and other securities, which may include mortgage-backed securities, asset-backed securities and collateralized
mortgage obligations, constitute approximately 66.2% of the portfolio.
The plan assets consist of mutual funds and the fair value is priced based on the market value of the underlying investments in
the portfolio. The fair value of the Company’s plan assets at December 31, 2012 are as follows (in millions):
Cash, including money market funds
Investment funds – large-cap(1)
Investment funds – mid/small-cap(2)
Investment funds – international(3)
Investment funds – equity index(4)
Investment funds – high yield bonds(5)
Investment funds – long corporate A bonds(6)
Investment funds – long duration bonds(7)
Total investments measured at fair value
Total
Level 1
Level 2
$
$
2.8
12.6
5.6
10.8
12.7
10.6
34.3
34.2
123.6
$
$
2.8
—
—
—
—
—
—
—
2.8
$
$
—
12.6
5.6
10.8
12.7
10.6
34.3
34.2
120.8
The following information was provided to the Company by the fund manager.
(1) This class invests in U.S. large capitalization stocks with approximately 90% in information technology, energy, financial, health care, consumer and industrial
sectors and 10% in other industries.
(2) This class invests in U.S. mid to small capitalization stocks with approximately 91% in financial, information technology, industrial, consumer, health care,
and energy sectors and 9% in other industries.
(3) This class includes non-U.S. stocks in diversified industries and countries with approximately 84% in financial, consumer, industrial, energy and health care
sectors and 16% in other industries.
(4) This class invests in U.S. stocks with approximately 92% in information technology, financial, energy, health care, consumer and industrial sectors and 8%
in other industries. The fund seeks a total return, which corresponds to the S&P 500 Index.
(5) This class primarily focuses on the high yield market of investment grade bonds of U.S. issuers from diverse industries with approximately 69% in the
energy, telecommunications, consumer, financial, and health care sectors.
(6) This class primarily targets the longer-term, higher investment grade bond market of U.S. issuers with approximately 78% in the energy, telecommunications,
consumer, financial and health care sectors, approximately 9% in U.S. Treasuries and approximately 13% in other securities.
(7) This class primarily focuses on investments with a long duration and includes approximately 46% of investment grade bonds of U.S. issuers in the energy,
telecommunications, consumer, financial and health care sectors sectors, 40% in U.S. government securities and 14% in other securities.
The Company has targets and allowed target variances for its U.S. defined benefit plan in individual funds within the portfolio.
The table below is a composite of the individual targets and allocation at December 31, 2012 and 2011:
Equity Securities
Fixed Income
Total
Percentage of Plan Assets
at December 31,
2012
2011
33.8%
66.2%
100.0%
40.0%
60.0%
100.0%
Target Allocation
2013
31%-36%
64%-69%
2,013
F-41
The Company plans to contribute approximately $7 million to its U.S. defined benefit pension and post-retirement plans in
2013. During the year ended December 31, 2012, the Company contributed $8.7 million to its U.S. defined benefit pension plans
and post-retirement plans. The Company’s estimated future benefit payments under its U.S. plan are as follows (in millions):
Year Ending December 31,
2013
2014
2015
2016
2017
2018-2022
Pension Benefits
10.3
$
10.2
$
11.2
$
11.1
$
11.1
$
54.6
$
Other Benefits
1.1
$
0.9
$
0.8
$
0.7
$
0.6
$
2.4
$
For measurement purposes, a 8.00% rate of increase in the per capita cost of covered health care benefits was assumed for 2013,
7.00% for 2014, 6.00% for 2015 and 5.00% for 2016 and thereafter. Assumed health care cost trend rates may have a significant
effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates
would have the following effects (in millions):
Effect on total service and interest cost components
Effect on postretirement benefit obligation
1-Percentage-
Point Increase
$
$
— $
$
0.4
1-Percentage-
Point Decrease
—
(0.3)
Non-U.S. Plans – The Company maintains defined benefit plans in France, Germany, India, Switzerland and the United Kingdom
for some of its subsidiaries. During the third quarter of 2010, the United Kingdom plan was frozen and a curtailment gain was
recognized as part of other comprehensive income. The United Kingdom plan is a funded plan and the Company funds this plan
in accordance with funding regulations in the United Kingdom and a negotiated agreement between the Company and the plan’s
trustees. The plans in France, Germany and India are unfunded plans. For the Company’s operations in Austria, Italy and Korea
there are mandatory termination indemnity plans providing a benefit that is payable upon termination of employment in substantially
all cases of termination. The Company records this obligation based on the mandated requirements. The measure of the current
obligation is not dependent on the employees’ future service and therefore is measured at current value.
On August 16, 2011, the Company acquired Demag Cranes AG which has defined benefit plans in Germany and Switzerland.
The plans in Germany are unfunded plans. The plan in Switzerland is funded and the Company funds this plan in accordance with
funding regulations in Switzerland. The impact of these plans was included from the date of acquisition and resulted in an additional
liability of approximately $200 million in Retirement plans on the Consolidated Balance Sheet. See Note I – “Acquisitions.”
F-42
Information regarding the Company’s non-U.S. plans was as follows (in millions):
Accumulated benefit obligation at end of year
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Acquisitions and divestitures
Actuarial (gain) loss
Benefits paid
Foreign exchange effect
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Acquisitions
Actual return on plan assets
Employer contribution
Employee contribution
Benefits paid
Foreign exchange effect
Fair value of plan assets at end of year
Funded status
Amounts recognized in the statement of financial position consist of:
Current liabilities
Non-current liabilities
Total liabilities
Amounts recognized in accumulated other comprehensive income consist of:
Actuarial net loss
Prior service cost
Total amounts recognized in accumulated other comprehensive income
Pension Benefits
2012
2011
$
$
505.9
397.0
7.8
17.0
12.0
88.6
(22.7)
11.9
511.6
119.7
—
8.5
21.4
0.5
(22.7)
5.1
132.5
(379.1) $
13.3
365.8
379.1
116.9
0.4
117.3
$
$
$
$
388.6
179.9
4.4
12.8
228.2
15.0
(15.3)
(28.0)
397.0
91.5
28.2
7.2
12.6
0.2
(15.3)
(4.7)
119.7
(277.3)
13.2
264.1
277.3
26.8
0.4
27.2
$
$
$
$
$
$
$
The weighted average assumptions as of December 31:
Discount rate
Expected return on plan assets
Rate of compensation increase
Pension Benefits
2012
2011
2010
3.39%
5.59%
1.67%
4.55%
5.59%
1.75%
5.50%
6.00%
1.04%
F-43
Components of net periodic cost:
Service cost
Interest cost
Expected return on plan assets
Employee contributions
Recognition of prior service cost
Amortization of actuarial loss
Net periodic cost
Pension Benefits
2012
2011
2010
$
$
7.8
17.0
(6.8)
(0.5)
10.8
0.4
28.7
$
$
4.4
12.8
(6.0)
(0.2)
—
0.3
11.3
$
$
4.9
9.0
(5.0)
(0.3)
—
1.4
10.0
Due to clarification of requirements in Brazil, during the year ended December 31, 2012, the Company recognized a liability of
$10.8 million related to a provision for post-employment benefits. This amount is included above in Net periodic cost as Recognition
of prior service cost.
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive
Income:
Net loss (gain)
Amortization of actuarial losses
Foreign exchange effect
Total recognized in other comprehensive income
Amounts expected to be recognized as components of net periodic cost for the year ending
December 31, 2013:
Actuarial net loss
Pension Benefits
2012
2011
$
$
86.9
(0.7)
3.8
90.0
$
$
$
13.8
(0.3)
(1.0)
12.5
5.5
For the non-U.S. defined benefit pension plans that have accumulated benefit obligations in excess of plan assets, the projected
benefit obligation, accumulated benefit obligation, and fair value of plan assets were $511.6 million, $505.9 million and $132.5
million, respectively, as of December 31, 2012, and $397.0 million, $388.6 million and $119.7 million, respectively, as of
December 31, 2011.
The assumed discount rate reflects the rates at which the pension benefits could effectively be settled. The Company looks at
redemption yields of a range of high quality corporate bonds of suitable term in each of the countries specific to the plan.
The methodology used to determine the rate of return on non-U.S. pension plan assets was based on average rate of earnings on
funds invested and to be invested. Based on historical returns and future expectations, the Company believes the investment return
assumptions are reasonable. The expected rate of return of plan assets represents an estimate of long-term returns on the investment
portfolio. This is reviewed by the trustees and varies with each section of the plan.
The overall investment strategy for the non-U.S. defined benefit plans is to achieve a mix of investments to support long-term
growth and minimize volatility while maximizing rates of return by diversification of asset types, fund strategies and fund managers.
The investment target allocations established to support these goals are 50%-95% for fixed income securities, 5%-35% for equity
securities and 0%-15% for real estate. Fixed income securities include U.K. government securities, corporate bonds and securities
that invest in a diversified range of property principally in the retail, office and industrial/warehouse sectors. Securities primarily
include investments in companies from diversified industries that are generally located in Europe (91%), North America (6%) and
Asia Pacific (3%).
F-44
The assets for the non-U.S. plans consist of mutual investment funds and the fair value is priced based on the market value of the
underlying investments in the portfolio. The fair value of the Company’s plan assets at December 31, 2012 are as follows (in
millions):
Cash
Investment funds – European Ex U.K. equities(1)
Investment funds – U.K. equities(2)
Investment funds – North American equities(3)
Investment funds – Other equities(4)
Investment funds –Other bonds(5)
Investment funds – U.K. long bond(6)
Investment funds – real estate(7)
Total investments measured at fair value
Total
Level 1
Level 2
$
$
5.2
7.9
9.7
8.2
19.5
18.3
55.5
8.2
132.5
$
$
5.2
—
—
—
—
—
—
—
5.2
$
$
—
7.9
9.7
8.2
19.5
18.3
55.5
8.2
127.3
The following information was provided to the Company by the fund managers.
(1) This class invests in stocks of European (excluding U.K.) based companies with approximately 94% in financial, consumer, industrials, health care,
basic materials, oil and gas and communications sectors and 6% in other industries.
(2) This class invests in stocks of U.K. based companies with approximately 95% in financial, oil and gas, consumer, basic materials, health care and
industrial sectors and 5% in other industries.
(3) This class invests in stocks of North American based companies with approximately 97% in technology, financial, oil and gas, consumer, industrial
and health care sectors and 3% in other industries.
(4) This class invests in stocks with approximately 88% in financial, industrial, consumer, basic materials and information technology, and 12% in other
industries.
(5) This class invests in bonds with approximately 65% in European government bonds, corporate bonds and loans backed by Swiss mortgages, and 35%
in other investments.
(6) This class represents U.K. government securities, other sterling denominated fixed-income securities and index linked securities. Approximately 51%
is invested in corporate bonds, 45%, in U.K. government securities and 4% in other investments.
(7) This class primarily comprises investments in a diversified range of property principally in the residential, retail, office and industrial/warehouse sectors.
For the Companies Non-U.S. defined benefit plans, the actual asset allocation for December 31, 2012 and 2011 and the target
allocation for 2013 are as follows:
Equity Securities
Fixed Income
Real Estate
Total
Percentage of Plan Assets
at December 31,
2012
2011
11%
87%
2%
100%
37%
58%
5%
100%
Target Allocation
2013
5%-35%
50%-95%
0%-15%
The Company plans to contribute approximately $17 million to its non-U.S. defined benefit pension plans for the year ending
December 31, 2013. During the year ended December 31, 2012, the Company contributed $21.4 million to its non-U.S. defined
benefit pension plans. The Company’s estimated future benefit payments under its non-U.S. defined benefit pension plans are as
follows (in millions):
Year Ending December 31,
2013
2014
2015
2016
2017
2018-2022
$
$
$
$
$
$
18.5
19.2
19.5
20.8
21.6
116.6
F-45
Savings Plans
The Company sponsors various tax deferred savings plans into which eligible employees may elect to contribute a portion of their
compensation. The Company may, but is not obligated to, contribute to certain of these plans. The Company’s Common Stock
held in a rabbi trust pursuant to the Deferred Compensation Plan is treated in a manner similar to treasury stock. The number of
shares of the Company’s Common Stock held in the rabbi trust at December 31, 2012 and 2011 totaled and 0.7 million and 0.9
million, respectively.
Charges recognized for the Deferred Compensation Plan and these other savings plans were $16.6 million, $12.0 million and $9.7
million for the years ended December 31, 2012, 2011 and 2010, respectively. For the year ended December 31, 2010 certain of
these savings plan costs were stock-based and included in total stock-based compensation expense in the amount of $8.3 million.
For the years ended December 31, 2012 and 2011, Company matching contribution to tax deferred savings plans were invested
at the direction of plan participants.
NOTE P– STOCKHOLDERS’ EQUITY
On December 31, 2012, there were 122.9 million shares of Common Stock issued and 109.9 million shares of Common Stock
outstanding. Of the 177.1 million unissued shares of Common Stock at that date, 3.8 million shares of Common Stock were
reserved for issuance for the exercise of stock options and the vesting of restricted stock. Additionally, 7.9 million shares of
Common Stock were reserved for issuance for the shares that are contingently issuable for the 4% Convertible Notes.
Common Stock in Treasury. The Company values treasury stock on an average cost basis. As of December 31, 2012, the Company
held 13.0 million shares of Common Stock in treasury totaling $597.8 million, including 0.7 million shares held in a trust for the
benefit of the Company’s Deferred Compensation Plan at a total of $14.1 million.
Preferred Stock. The Company’s certificate of incorporation was amended in June 1998 to authorize 50.0 million shares of preferred
stock, $0.01 par value per share. As of December 31, 2012 and 2011, there were no shares of preferred stock outstanding.
Long-Term Incentive Plans. In May 2009, the stockholders approved the Terex Corporation 2009 Omnibus Incentive Plan (the
“2009 Plan”). The purpose of the 2009 Plan is to provide a means whereby employees, directors and third-party service providers
of the Company develop a sense of proprietorship and personal involvement in the development and financial success of the
Company, and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of
the Company and its stockholders. The 2009 Plan provides for incentive compensation in the form of (i) options to purchase
shares of Common Stock, (ii) stock appreciation rights, (iii) restricted stock awards and restricted stock units, (iv) other stock
awards, (v) cash awards, and (vi) performance awards. In May 2011, the stockholders approved an increase in the number of
shares of Common Stock authorized for issuance under the 2009 Plan from 3.0 million shares to 5.0 million shares. The maximum
number of shares available for issuance under the 2009 Plan is 5.0 million shares plus the number of shares remaining available
for issuance under the Terex Corporation 2000 Incentive Plan (the “2000 Plan”) and the 1996 Terex Corporation Long-Term
Incentive Plan (the “1996 Plan”). As of December 31, 2012, 2.5 million shares were available for grant under the 2009 Plan.
In May 2000, the stockholders approved the 2000 Plan. The purpose of the 2000 Plan is to assist the Company in attracting and
retaining selected individuals to serve as directors, officers, consultants, advisers and employees of the Company and its subsidiaries
and affiliates who will contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of
all stockholders of the Company through the additional incentive inherent in the ownership of the Common Stock. The 2000 Plan
authorizes the granting of (i) options to purchase shares of Common Stock, (ii) stock appreciation rights, (iii) stock purchase
awards, (iv) restricted stock awards and, (v) performance awards. In May 2002, the stockholders approved an increase in the
number of shares of Common Stock authorized for issuance under the 2000 Plan from 4.0 million shares to 7.0 million shares. In
May 2004, the stockholders approved an increase in the number of shares of Common Stock authorized for issuance under the
2000 Plan from 7.0 million shares to 12.0 million shares. As of May 14, 2009, the date of stockholder approval of the 2009 Plan,
any shares related to awards under the 2000 Plan that were not issued or were subsequently forfeited, expired or otherwise
terminated, were available for grant under the 2009 Plan.
In May 1996, the stockholders approved the 1996 Plan. The 1996 Plan authorizes the granting, among other things, of (i) options
to purchase shares of Common Stock, (ii) shares of Common Stock, including restricted stock, and (iii) cash bonus awards based
upon a participant’s job performance. In May 1999, the stockholders approved an increase in the aggregate number of shares of
Common Stock (including restricted stock, if any) optioned or granted under the 1996 Plan to 4.0 million shares. As of May 14,
2009, the date of stockholder approval of the 2009 Plan, any shares related to awards under the 1996 Plan that were not issued or
were subsequently forfeited, expired or otherwise terminated, were available for grant under the 2009 Plan.
F-46
Substantially all stock option grants under the 2000 Plan and the 1996 Plan vested over a four year period and have a contractual
life of ten years. There were no options granted during the years ended December 31, 2012, 2011 or 2010. The total intrinsic
value of options exercised during the years ended December 31, 2012, 2011 and 2010 was $0.2 million, $0.3 million and $0.3
million, respectively.
The following table is a summary of stock options under all of the Company’s plans.
Outstanding at December 31, 2011
Exercised
Canceled or expired
Outstanding at December 31, 2012
Exercisable at December 31, 2012
Vested at December 31, 2012
Weighted
Average
Exercise Price
per Share
Weighted
Average
Remaining
Contractual
Life (in years)
Aggregate
Intrinsic
Value
Number of
Options
826,193
$
(291,369) $
(15,600) $
$
519,224
$
519,224
$
519,224
18.89
10.38
41.19
23.00
23.00
23.00
1.63
1.63
1.63
$
$
$
5.6
5.6
5.6
Under the 2009 Plan, 2000 Plan and the 1996 Plan, approximately 15% of all restricted stock awards vest over a four year period,
with 25% of each grant vesting on each of the first four anniversary dates of the grant; approximately 20% of all restricted stock
awards vest over a five year period and approximately 65% of all restricted stock awards vest over a three year period with
approximately 60% of these awards vesting on the first three anniversary dates and approximately 40% vesting at the end of the
three year period. Approximately 40% of the outstanding restricted stock awards are subject to performance targets that may or
may not be met and for which the performance period has not yet been completed. The fair value of the restricted stock awards
is based on the market price at the date of grant except for 904 thousand shares of performance grants based on a market condition.
The Company uses the Monte Carlo method to provide grant date fair value for awards with a market condition. The Monte Carlo
method is a statistical simulation technique used to provide the grant date fair value of an award. The following table presents the
weighted-average assumptions used in the valuations:
Dividend yields
Expected volatility
Risk free interest rate
Expected life (in years)
Grant date fair value per share
February 29, 2012
—%
59.15%
0.41%
3
$32.58
March 27, 2012
—%
56.83%
0.47%
3
$29.50
March 22, 2011
—%
80.29%
1.04%
3
$41.96
March 3, 2010
—%
59.04%
3.04%
4
$16.17 - $19.08
As of December 31, 2012, unrecognized compensation costs related to restricted stock totaled approximately $49.6 million, which
will be expensed over a weighted average period of 1.9 years. The weighted average fair value at date of grant for restricted stock
awards was $25.74, $34.99 and $20.18 for the years ended December 31, 2012, 2011 and 2010, respectively. The total fair value
of shares vested for restricted stock awards was $16.1 million, $26.3 million and $33.1 million for the years ended December 31,
2012, 2011 and 2010, respectively.
During the year ended December 31, 2012, the Company issued 58 thousand shares of its outstanding Common Stock which were
contributed into a deferred compensation plan under a Rabbi Trust.
The following table is a summary of restricted stock awards under all of the Company’s plans:
Nonvested at December 31, 2011
Granted
Vested
Canceled or expired
Nonvested at December 31, 2012
F-47
Restricted Stock
Awards
$
3,134,940
1,482,752
$
(948,207) $
(396,766) $
$
3,272,719
Weighted
Average Grant
Date Fair Value
22.91
25.74
16.94
24.36
25.17
Compensation expense recognized under all stock-based compensation arrangements was $29.8 million, $23.6 million and $45.3
million for the years ended December 31, 2012, 2011 and 2010, respectively. The stock-based compensation expense was included
in Selling, general and administrative expenses in the Consolidated Statements of Income. The related tax benefit reflected in the
provision was $9.1 million, $7.1 million and $14.1 million for the years ended December 31, 2012, 2011 and 2010, respectively.
Cash received from option exercises under all stock-based compensation arrangements totaled $1.3 million.
The excess tax benefit for all stock-based compensation is included in the Consolidated Statement of Cash Flows as an operating
cash outflow and a financing cash inflow.
Comprehensive Income (Loss). The following table reflects the accumulated balances of other comprehensive income (loss) (in
millions):
Accumulated Other Comprehensive Income (Loss) Attributable to Terex Corporation
Pension
Liability
Adjustment
Cumulative
Translation
Adjustment
Derivative
Hedging
Adjustment
Debt & Equity
Securities
Adjustment
Balance at January 1, 2010
Current year change
Balance at December 31, 2010
Current year change
Balance at December 31, 2011
Current year change
Balance at December 31, 2012
$
$
(87.7) $
28.0
(59.7)
(23.5)
(83.2)
(56.5)
(139.7) $
127.3
(65.9)
61.4
(101.0)
(39.6)
53.7
14.1
$
$
(3.6) $
1.5
(2.1)
(1.5)
(3.6)
3.2
(0.4) $
Accumulated Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest
Pension
Liability
Adjustment
Cumulative
Translation
Adjustment
Derivative
Hedging
Adjustment
Debt & Equity
Securities
Adjustment
Balance at January 1, 2010
Current year change
Balance at December 31, 2010
Current year change
Balance at December 31, 2011
Current year change
Balance at December 31, 2012
$
$
— $
—
—
—
—
—
— $
0.8
0.1
0.9
(0.9)
—
0.5
0.5
$
$
— $
—
—
—
—
—
— $
Accumulated Other Comprehensive Income (Loss)
Pension
Liability
Adjustment
Cumulative
Translation
Adjustment
Derivative
Hedging
Adjustment
Debt & Equity
Securities
Adjustment
Balance at January 1, 2010
Current year change
Balance at December 31, 2010
Current year change
Balance at December 31, 2011
Current year change
Balance at December 31, 2012
$
$
(87.7) $
28.0
(59.7)
(23.5)
(83.2)
(56.5)
(139.7) $
128.1
(65.8)
62.3
(101.9)
(39.6)
54.2
14.6
$
$
(3.6) $
1.5
(2.1)
(1.5)
(3.6)
3.2
(0.4) $
Accumulated
Other
Comprehensive
Income (Loss)
36.0
64.4
100.4
(225.9)
(125.5)
1.4
(124.1)
$
— $
100.8
100.8
(99.9)
0.9
1.0
1.9
Accumulated
Other
Comprehensive
Income (Loss)
0.8
0.1
0.9
(0.9)
—
0.5
0.5
— $
—
—
—
—
—
— $
Accumulated
Other
Comprehensive
Income (Loss)
36.8
64.5
101.3
(226.8)
(125.5)
1.9
(123.6)
$
— $
100.8
100.8
(99.9)
0.9
1.0
1.9
As of December 31, 2012, other accumulated comprehensive income for the pension liability adjustment and the derivative hedging
adjustment are net of tax benefits of $61.0 million and a tax provision of $0.5 million, respectively.
F-48
Redeemable Noncontrolling Interest
Noncontrolling interest with redemption features that are not solely within the Company’s control (“redeemable noncontrolling
interest”) are presented separately from Total stockholders’ equity in the Consolidated Balance Sheet at the maximum redemption
value. If the maximum redemption value is greater than carrying value, the increase is adjusted directly to additional paid in
capital and does not impact net income.
Upon effectiveness of the DPLA on April 18, 2012, the Company became obligated to purchase shares of Demag Cranes AG held
by the noncontrolling interest shareholders for a cash payment upon demand. See Note I – “Acquisitions.”
The DPLA is a binding agreement. However, noncontrolling interest shareholders of Demag Cranes AG initiated appraisal
proceedings in the German court system that challenges the fair value determination of the €45.52 tender price and €3.33 annual
guaranteed payment. If a higher price is determined, the additional obligation would be recorded as an adjustment directly to
additional paid in capital with a corresponding increase to the Company’s DPLA obligation. Until the appraisal proceedings are
completed and for a two month period thereafter, noncontrolling interest shareholders who do not tender their shares shall receive
the annual guaranteed payment and retain their right to tender their shares to the Company. Following the completion of the two
month period after the appraisal proceedings are completed, noncontrolling interest shareholders who do not tender shall continue
to receive the annual guaranteed payments but will no longer have the right to tender their shares to the Company.
Beginning on the effective date of the DPLA, the costs of the annual guaranteed payment are reflected as Other income (expense)
in the Consolidated Statement of Income.
The following is a summary of redeemable noncontrolling interest as of December 31, 2012 (in millions):
Balance at January 1, 2012
Reclassification from noncontrolling interest (as of April 18, 2012)
Adjustment for maximum redemption value
Redemptions
Accrued guaranteed payment obligation
Foreign currency translation
Balance at December 31, 2012
$
$
—
247.5
12.5
(3.6)
11.3
(20.8)
246.9
This obligation approximates the cost if all remaining shares were purchased by the Company on December 31, 2012 and is
presented in the Consolidated Balance Sheet in Redeemable noncontrolling interest, which is considered temporary equity.
Approximately $16.5 million is expected to be paid annually beginning in 2013 and continuing until the appraisal proceedings
are completed.
NOTE Q – LITIGATION AND CONTINGENCIES
General
The Company is involved in various legal proceedings, including product liability, general liability, workers’ compensation liability,
employment, commercial and intellectual property litigation, which have arisen in the normal course of operations. The Company
is insured for product liability, general liability, workers’ compensation, employer’s liability, property damage and other insurable
risk required by law or contract, with retained liability or deductibles. The Company has recorded and maintains an estimated
liability in the amount of management’s estimate of the Company’s aggregate exposure for such retained liabilities and deductibles.
For such retained liabilities and deductibles, the Company determines its exposure based on probable loss estimations, which
requires such losses to be both probable and the amount or range of probable loss to be estimable. The Company believes it has
made appropriate and adequate reserves and accruals for its current contingencies and that the likelihood of a material loss beyond
the amounts accrued is remote except for those cases disclosed below where the Company includes a range of the possible loss.
The Company believes that the outcome of such matters, individually and in the aggregate, will not have a material adverse effect
on its consolidated financial position. However, the outcomes of lawsuits cannot be predicted and, if determined adversely, could
ultimately result in the Company incurring significant liabilities which could have a material adverse effect on its results of
operations.
F-49
ERISA, Securities and Stockholder Derivative Lawsuits
The Company has received complaints seeking certification of class action lawsuits in an ERISA lawsuit, a securities lawsuit and
a stockholder derivative lawsuit as follows:
• A consolidated complaint in the ERISA lawsuit was filed in the United States District Court, District of Connecticut on
September 20, 2010 and is entitled In Re Terex Corp. ERISA Litigation.
• A consolidated class action complaint for violations of securities laws in the securities lawsuit was filed in the United
States District Court, District of Connecticut on November 18, 2010 and is entitled Sheet Metal Workers Local 32 Pension
Fund and Ironworkers St. Louis Council Pension Fund, individually and on behalf of all others similarly situated v. Terex
Corporation, et al.
• A stockholder derivative complaint for violation of the Securities and Exchange Act of 1934, breach of fiduciary duty,
waste of corporate assets and unjust enrichment was filed on April 12, 2010 in the United States District Court, District
of Connecticut and is entitled Peter Derrer, derivatively on behalf of Terex Corporation v. Ronald M. DeFeo, Phillip C.
Widman, Thomas J. Riordan, G. Chris Andersen, Donald P. Jacobs, David A. Sachs, William H. Fike, Donald DeFosset,
Helge H. Wehmeier, Paula H.J. Cholmondeley, Oren G. Shaffer, Thomas J. Hansen, and David C. Wang, and Terex
Corporation.
These lawsuits generally cover the period from February 2008 to February 2009 and allege, among other things, that certain of
the Company’s SEC filings and other public statements contained false and misleading statements which resulted in damages to
the Company, the plaintiffs and the members of the purported class when they purchased the Company’s securities and in the
ERISA lawsuit and the stockholder derivative complaint, that there were breaches of fiduciary duties and of ERISA disclosure
requirements. The stockholder derivative complaint also alleges waste of corporate assets relating to the repurchase of the
Company’s shares in the market and unjust enrichment as a result of securities sales by certain officers and directors. The complaints
all seek, among other things, unspecified compensatory damages, costs and expenses. As a result, the Company is unable to
estimate a possible loss or a range of losses for these lawsuits. The stockholder derivative complaint also seeks amendments to
the Company’s corporate governance procedures in addition to unspecified compensatory damages from the individual defendants
in its favor.
The Company believes that the allegations in the suits are without merit, and Terex, its directors and the named executives will
continue to vigorously defend against them. The Company believes that it has acted, and continues to act, in compliance with
federal securities laws and ERISA law with respect to these matters. Accordingly, on November 19, 2010 the Company filed a
motion to dismiss the ERISA lawsuit and on January 18, 2011 the Company filed a motion to dismiss the securities lawsuit. These
motions are currently pending before the court. The plaintiff in the stockholder derivative lawsuit has agreed with the Company
to put this lawsuit on hold pending the outcome of the motion to dismiss in connection with the securities lawsuit.
Powerscreen Patent Infringement Lawsuit
On December 6, 2010, the Company received an adverse jury verdict in the amount of $15.8 million in a patent infringement
lawsuit brought against Powerscreen International Distribution Limited (“Powerscreen”) and Terex by Metso Minerals Inc.
(“Metso”) in the United States District Court for the Eastern District of New York. The lawsuit involved a claim by Metso that
the folding side conveyor of certain Powerscreen screening plants violated a patent held by Metso in the United States. Following
the verdict, Metso sought additional relief, including, additional damages, attorney’s fees, interest and trebling of all such amounts.
On December 9, 2011, a judgment in support of the jury verdict was issued and Metso was awarded certain additional damages,
interest and doubling of all such amounts. The Court declined to calculate the final amount of monetary damages pending the
outcome of the appeal. The Court also issued an injunction preventing marketing or selling of certain models of Powerscreen
mobile screening plants with the alleged infringing folding side conveyor design in the United States. These models have been
updated with Powerscreen’s new proprietary S range of conveyors. Thus, the judgment and injunction do not affect the continued
sale or use of any current model of Powerscreen mobile screening plants.
The Company does not agree that the accused Powerscreen mobile screening plants or their folding conveyor infringe the subject
patent held by Metso. These types of patent cases are complex and the Company strongly believes that the verdict is contrary to
both the law and the facts. The Company has appealed the verdict, posted an appeal bond in the amount of approximately $50
million while judgment is stayed pending the appeal process and believes that it will ultimately prevail on appeal. However, the
outcomes of lawsuits cannot be predicted and, if determined adversely, could ultimately result in the Company being required to
make a significant cash payment, which could have a material adverse effect on its results of operations.
F-50
Post-Closing Dispute with Bucyrus
See Note D – “Discontinued Operations” for further information on the Company’s dispute with Bucyrus regarding the calculation
of the value of the net assets of the Mining business.
Other
The Company is involved in various other legal proceedings, including workers’ compensation liability and intellectual property
litigation, which have arisen in the normal course of its operations. The Company has recorded provisions for estimated losses
in circumstances where a loss is probable and the amount or range of possible amounts of the loss is estimable.
The Company’s outstanding letters of credit totaled $324.0 million at December 31, 2012. The letters of credit generally serve
as collateral for certain liabilities included in the Consolidated Balance Sheet. Certain of the letters of credit serve as collateral
guaranteeing the Company’s performance under contracts.
The Company has a letter of credit outstanding covering losses related to two former subsidiaries’ workers’ compensation
obligations. The Company has recorded liabilities for these contingent obligations in circumstances where a loss is probable and
the amount or range of possible amounts of the loss is estimable.
Credit Guarantees
Customers of the Company from time to time may fund the acquisition of the Company’s equipment through third-party finance
companies. In certain instances, the Company may provide a credit guarantee to the finance company, by which the Company
agrees to make payments to the finance company should the customer default. The maximum liability of the Company is generally
limited to its customer’s remaining payments due to the finance company at the time of default. In the event of customer default,
the Company is generally able to recover and dispose of the equipment at a minimum loss, if any, to the Company.
As of December 31, 2012 and 2011, the Company’s maximum exposure to such credit guarantees was $64.3 million and $126.4
million, respectively, including total guarantees issued by Terex Demag GmbH, part of the Cranes segment, of $45.8 million and
$60.4 million, respectively; and Genie Holdings, Inc. and its affiliates (“Genie”), part of the AWP segment, of $9.7 million and
$18.0 million, respectively. The terms of these guarantees coincide with the financing arranged by the customer and generally do
not exceed five years. Given the Company’s position as the original equipment manufacturer and its knowledge of end markets,
the Company, when called upon to fulfill a guarantee, generally has been able to liquidate the financed equipment at a minimal
loss, if any, to the Company.
There can be no assurance that historical credit default experience will be indicative of future results. The Company’s ability to
recover losses experienced from its guarantees may be affected by economic conditions in effect at the time of loss.
Residual Value and Buyback Guarantees
The Company issues residual value guarantees under sales-type leases. A residual value guarantee involves a guarantee that a
piece of equipment will have a minimum fair market value at a future date. The maximum exposure for residual value guarantees
issued by the Company totaled $5.7 million and $13.5 million as of December 31, 2012 and 2011, respectively. The Company is
generally able to mitigate some of the risk associated with these guarantees because the maturity of the guarantees is staggered,
limiting the amount of used equipment entering the marketplace at any one time.
The Company from time to time guarantees that it will buy equipment from its customers in the future at a stated price if certain
conditions are met by the customer. Such guarantees are referred to as buyback guarantees. These conditions generally pertain
to the functionality and state of repair of the machine. As of December 31, 2012 and 2011, the Company’s maximum exposure
pursuant to buyback guarantees was $73.8 million and $103.4 million, respectively, including total guarantees issued by Genie of
$25.3 million and $45.4 million, respectively. Included in the December 31, 2012 and 2011 amounts are guarantees issued by
entities in the MHPS segment of $43.6 million and $54.5 million. The Company is generally able to mitigate some of the risk of
these guarantees by staggering the timing of the buybacks and through leveraging its access to the used equipment markets provided
by the Company’s original equipment manufacturer status.
See Note A – “Basis of Presentation – Revenue Recognition,” for a discussion of revenue recognition on arrangements with
buyback guarantees.
F-51
The Company has recorded an aggregate liability within Other current liabilities and Other non-current liabilities in the Consolidated
Balance Sheet of approximately $6 million and $12 million as of December 31, 2012 and 2011, respectively, for the estimated
fair value of all guarantees provided.
There can be no assurance that the Company’s historical experience in used equipment markets will be indicative of future results.
The Company’s ability to recover losses experienced from its guarantees may be affected by economic conditions in the used
equipment markets at the time of loss.
NOTE R – CONSOLIDATING FINANCIAL STATEMENTS
On January 18, 2011, the Company repaid the outstanding $297.6 million principal amount outstanding of its 7-3/8% Notes, on
September 28, 2012, the Company repaid the outstanding 10-7/8% Notes and in the fourth quarter of 2012, the Company repaid
the outstanding 8% Notes (see Note M – “Long-Term Obligations”). As a result of the Company’s redemption of the 7-3/8%
Notes, the 4% Convertible Notes, the 8% Notes, the 6% Notes and the 6-1/2% Notes were jointly and severally guaranteed by
the following wholly-owned subsidiaries of the Company (the “Wholly-owned Guarantors”): A.S.V., Inc., CMI Terex Corporation,
Fantuzzi Noell USA, Inc., Genie Financial Services, Inc., Genie Holdings, Inc., Genie Industries, Inc., Genie International, Inc.,
GFS National, Inc., Loegering Mfg. Inc., Powerscreen Holdings USA Inc., Powerscreen International LLC, Powerscreen North
America Inc., Powerscreen USA, LLC, Schaeff Incorporated, Schaeff of North America, Inc., 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 4% Convertible
Notes, the 6% Notes or the 6-1/2% Notes.
The following summarized condensed consolidating financial information for the Company segregates the financial information
of Terex Corporation, the Wholly-owned Guarantors and the non-guarantor subsidiaries. The results and financial position of
businesses acquired are included from the dates of their respective acquisitions.
Terex Corporation consists of parent company operations and non-guarantor subsidiaries directly owned by the parent
company. Subsidiaries of the parent company are reported on the equity basis. Wholly-owned Guarantors combine the operations
of the Wholly-owned Guarantor subsidiaries. Subsidiaries of Wholly-owned Guarantors that are not themselves guarantors are
reported on the equity basis. Non-guarantor subsidiaries combine the operations of subsidiaries which have not provided a
guarantee of the obligations of Terex Corporation under the 4% Convertible Notes, the 6% Notes or the 6-1/2% Notes. Debt and
goodwill allocated to subsidiaries are presented on a “push-down” accounting basis.
F-52
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2012
(in millions)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Income (loss) from operations
Interest income
Interest expense
Income (loss) from subsidiaries
Loss on early extinguishment of debt
Other income (expense) – net
Income (loss) from continuing operations before
income taxes
(Provision for) benefit from income taxes
Income (loss) from continuing operations
Income from discontinued operations – net of tax
Gain (loss) on disposition of discontinued operations
– net of tax
Net income (loss)
Net loss attributable to noncontrolling interest
Net income (loss) attributable to Terex Corporation
Comprehensive income (loss), net of tax
Comprehensive
loss
noncontrolling interest
(income) attributable
to
Comprehensive income (loss) attributable to Terex
Corporation
Terex
Corporation
261.2
$
(233.7)
27.5
(27.6)
(0.1)
225.6
(364.9)
320.1
(79.6)
(33.2)
Wholly-
owned
Guarantors
$ 2,656.2
(2,226.3)
429.9
(208.3)
221.6
258.2
(108.9)
(3.0)
—
34.2
Non-
guarantor
Subsidiaries
5,282.5
$
(4,294.3)
988.2
(811.1)
177.1
10.8
(176.6)
(0.6)
(3.4)
(5.2)
Intercompany
Eliminations
$
Consolidated
7,348.4
(5,902.8)
1,445.6
(1,047.0)
398.6
8.8
(164.6)
—
(83.0)
(4.2)
(851.5) $
851.5
—
—
—
(485.8)
485.8
(316.5)
—
—
67.9
39.8
107.7
—
(1.9)
105.8
—
105.8
107.2
—
$
$
402.1
(64.0)
338.1
—
—
338.1
—
338.1
339.1
—
$
$
2.1
(30.0)
(27.9)
1.8
2.3
(23.8)
2.2
(21.6) $
(316.5)
—
(316.5)
—
—
(316.5)
—
(316.5) $
155.6
(54.2)
101.4
1.8
0.4
103.6
2.2
105.8
(73.9) $
(266.9) $
105.5
1.7
—
1.7
107.2
$
339.1
$
(72.2) $
(266.9) $
107.2
$
$
$
F-53
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2011
(in millions)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Income (loss) from operations
Interest income
Interest expense
Income (loss) from subsidiaries
Loss on early extinguishment of debt
Other expense – net
Terex
Corporation
336.9
$
(301.2)
35.7
(23.5)
12.2
161.5
(302.9)
75.8
(7.7)
92.7
Wholly-
owned
Guarantors
$ 2,340.8
(2,044.0)
296.8
(226.2)
70.6
201.0
(74.3)
(7.3)
—
(13.8)
Non-
guarantor
Subsidiaries
4,654.9
$
(4,027.1)
627.8
(629.4)
(1.6)
15.7
(121.6)
—
—
52.7
Intercompany
Eliminations
$
Consolidated
6,504.6
(5,544.3)
960.3
(879.1)
81.2
14.3
(134.9)
—
(7.7)
131.6
(828.0) $
828.0
—
—
—
(363.9)
363.9
(68.5)
—
—
Income (loss) from continuing operations before income
taxes
(Provision for) benefit from income taxes
Income (loss) from continuing operations
Income (loss) from discontinued operations – net of
tax
Gain (loss) on disposition of discontinued operations
– net of tax
Net income (loss)
Net loss attributable to noncontrolling interest
Net income (loss) attributable to Terex Corporation
$
31.6
15.9
47.5
—
(2.3)
45.2
—
45.2
$
176.2
(66.1)
110.1
—
—
110.1
—
110.1
$
(54.8)
(0.2)
(55.0)
5.8
3.1
(46.1)
4.5
(41.6) $
(68.5)
—
(68.5)
—
—
(68.5)
—
(68.5) $
84.5
(50.4)
34.1
5.8
0.8
40.7
4.5
45.2
Comprehensive income (loss), net of tax
(180.7)
139.5
(106.1)
(38.8)
(186.1)
Comprehensive loss (income) attributable to
noncontrolling interest
Comprehensive income (loss) attributable to Terex
Corporation
—
—
5.4
—
5.4
$
(180.7) $
139.5
$
(100.7) $
(38.8) $
(180.7)
F-54
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2010
(in millions)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Income (loss) from operations
Interest income
Interest expense
Income (loss) from subsidiaries
Loss on early extinguishment of debt
Other expense – net
Income (loss) from continuing operations before income
taxes
(Provision for) benefit from income taxes
Income (loss) from continuing operations
Income (loss) from discontinued operations – net of
tax
Gain (loss) on disposition of discontinued operations
– net of tax
Net income (loss)
Net income attributable to noncontrolling interest
Net income (loss) attributable to Terex Corporation
Comprehensive income (loss), net of tax
Comprehensive loss (income) attributable to
noncontrolling interest
Comprehensive income (loss) attributable to Terex
Corporation
Terex
Corporation
218.9
$
(200.8)
18.1
(79.4)
(61.3)
56.2
(323.0)
440.9
(1.4)
(1.6)
Wholly-
owned
Guarantors
$ 1,619.2
(1,439.4)
179.8
(187.6)
(7.8)
193.1
(77.3)
(3.9)
—
17.6
Non-
guarantor
Subsidiaries
3,141.4
$
(2,736.4)
405.0
(409.7)
(4.7)
28.0
(12.6)
—
—
(43.5)
Intercompany
Eliminations
$
Consolidated
4,418.2
(3,815.3)
602.9
(676.7)
(73.8)
9.8
(145.4)
—
(1.4)
(27.5)
(561.3) $
561.3
—
—
—
(267.5)
267.5
(437.0)
—
—
109.8
119.2
229.0
121.7
(45.2)
76.5
(3.5)
(2.3)
133.0
358.5
—
358.5
422.9
—
$
$
76.9
151.1
—
151.1
152.0
—
$
$
$
$
(32.8)
(47.2)
(80.0)
(9.5)
379.4
289.9
(4.0)
285.9
295.3
(4.1)
$
$
(437.0)
—
(437.0)
—
—
(437.0)
—
(437.0) $
(238.3)
26.8
(211.5)
(15.3)
589.3
362.5
(4.0)
358.5
(443.2) $
427.0
—
(4.1)
$
422.9
$
152.0
$
291.2
$
(443.2) $
422.9
F-55
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2012
(in millions)
Terex
Corporation
Wholly-
owned
Guarantors
Non-
guarantor
Subsidiaries
Intercompany
Eliminations
Consolidated
Assets
Current assets
Cash and cash equivalents
Trade receivables – net
Intercompany receivables
Inventories
Other current assets
Total current assets
Property, plant and equipment – net
Goodwill
Non-current intercompany receivables
Investment in and advances to (from) subsidiaries
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities
$
1.4
$
637.0
$
— $
678.0
$
39.6
30.4
113.6
48.4
102.6
334.6
69.7
—
1,294.8
3,274.1
54.3
214.0
142.5
387.9
37.2
783.0
110.8
149.6
1,562.5
207.6
178.7
833.3
62.5
1,279.3
186.3
2,998.4
632.8
1,095.7
39.6
69.5
567.8
$ 5,027.5
$ 2,992.2
$
5,403.8
$
—
(318.6)
—
—
(318.6)
—
—
(2,896.9)
(3,461.8)
—
(6,677.3) $
Notes payable and current portion of long-term debt $
4.6
$
— $
79.2
$
— $
Trade accounts payable
Intercompany payables
Accruals and other current liabilities
Total current liabilities
Long-term debt, less current portion
Non-current intercompany payables
Other non-current liabilities
Redeemable noncontrolling interest
Total stockholders’ equity
13.0
15.5
98.0
131.1
1,254.6
1,512.7
121.4
—
157.2
55.1
126.0
338.3
1.7
41.8
33.2
—
2,007.7
2,577.2
465.3
248.0
765.5
1,558.0
758.6
1,342.4
589.7
246.9
908.2
Total liabilities and stockholders’ equity
$ 5,027.5
$ 2,992.2
$
5,403.8
$
—
(318.6)
—
(318.6)
—
(2,896.9)
—
—
(3,461.8)
(6,677.3) $
F-56
1,077.7
—
1,715.6
326.1
3,797.4
813.3
1,245.3
—
89.4
800.8
6,746.2
83.8
635.5
—
989.5
1,708.8
2,014.9
—
744.3
246.9
2,031.3
6,746.2
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2011
(in millions)
Assets
Current assets
Cash and cash equivalents
Trade receivables – net
Intercompany receivables
Inventories
Other current assets
Total current assets
Property, plant and equipment – net
Goodwill
Non-current intercompany receivables
Investment in and advances to (from) subsidiaries
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities
Terex
Corporation
Wholly-
owned
Guarantors
Non-
guarantor
Subsidiaries
Intercompany
Eliminations
Consolidated
$
264.0
$
2.3
$
507.8
$
— $
774.1
32.0
48.9
71.3
118.0
534.2
62.8
—
1,272.8
2,698.6
113.4
229.1
118.3
378.8
38.2
766.7
109.6
149.6
1,236.7
68.8
186.1
917.0
74.8
1,308.0
186.7
2,994.3
663.1
1,083.3
40.3
42.6
583.1
$ 4,681.8
$ 2,517.5
$
5,406.7
$
—
(242.0)
—
—
(242.0)
—
—
(2,549.8)
(2,750.8)
—
(5,542.6) $
Notes payable and current portion of long-term debt $
4.6
$
0.1
$
72.3
$
— $
Trade accounts payable
Intercompany payables
Accruals and other current liabilities
Total current liabilities
Long-term debt, less current portion
Non-current intercompany payables
Other non-current liabilities
Total stockholders’ equity
29.6
—
95.8
130.0
1,261.6
1,201.0
178.9
1,910.3
164.8
49.3
122.8
337.0
1.8
—
37.8
2,140.9
570.2
192.7
830.7
1,665.9
960.0
1,348.8
544.0
888.0
Total liabilities and stockholders’ equity
$ 4,681.8
$ 2,517.5
$
5,406.7
$
—
(242.0)
—
(242.0)
—
(2,549.8)
—
(2,750.8)
(5,542.6) $
F-57
1,178.1
—
1,758.1
342.9
4,053.2
835.5
1,232.9
—
59.2
882.6
7,063.4
77.0
764.6
—
1,049.3
1,890.9
2,223.4
—
760.7
2,188.4
7,063.4
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2012
(in millions)
Terex
Corporation
Wholly-
owned
Guarantors
Non-
guarantor
Subsidiaries
Intercompany
Eliminations
Consolidated
$
(15.5) $
137.5
$
170.3
$
— $
292.3
Net cash provided by (used in) operating activities of
continuing operations
Cash flows from investing activities
Capital expenditures
Acquisition of business, net of cash acquired
Other investments
Proceeds from disposition of discontinued
operations
Proceeds from sale of assets
Intercompany investing activities
Other investing activities, net
Net cash provided by (used in) investing activities of
continuing operations
Cash flows from financing activities
Repayments of debt
Proceeds from issuance of debt
Payment of debt issuance costs
Purchase of noncontrolling interest
Distributions to noncontrolling interest
Intercompany financing activities
Other financing activities, net
Net cash provided by (used in) financing activities of
continuing operations
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
(7.1)
—
(4.5)
—
0.6
(89.6)
—
(17.1)
—
—
—
6.1
(127.3)
—
(58.3)
(3.4)
(19.6)
3.5
27.9
134.0
(4.4)
(100.6)
(138.3)
79.7
(272.5)
59.3
—
(3.5)
(4.9)
88.9
0.7
(1,260.4)
1,175.0
(20.7)
—
—
(6.0)
3.8
(108.3)
—
(224.4)
264.0
(0.1)
—
—
—
—
—
—
(0.1)
—
(0.9)
2.3
—
—
—
—
—
82.9
—
82.9
—
—
—
—
—
(82.9)
—
(82.5)
(3.4)
(24.1)
3.5
34.6
—
(4.4)
(76.3)
(1,533.0)
1,234.3
(20.7)
(3.5)
(4.9)
—
4.5
(132.0)
(82.9)
(323.3)
11.2
129.2
507.8
—
—
—
11.2
(96.1)
774.1
678.0
Cash and cash equivalents, end of period
$
39.6
$
1.4
$
637.0
$
— $
F-58
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2011
(in millions)
Net cash provided by (used in) operating activities of
continuing operations
Cash flows from investing activities
Capital expenditures
Acquisition of business, net of cash acquired
Proceeds from disposition of discontinued
operations
Investments in derivative securities
Proceeds from sale of assets
Intercompany investing activities
Other investing activities, net
Net cash provided by (used in) investing activities of
continuing operations
Cash flows from financing activities
Repayments of debt
Proceeds from issuance of debt
Payment of debt issuance costs
Purchase of noncontrolling interest
Intercompany financing activities
Other financing activities, net
Net cash provided by (used in) financing activities of
continuing operations
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Terex
Corporation
Wholly-
owned
Guarantors
Non-
guarantor
Subsidiaries
Intercompany
Eliminations
Consolidated
$
(7.1) $
17.0
$
12.8
$
— $
22.7
(10.4)
—
—
(16.1)
531.8
(526.1)
—
(22.5)
(2.0)
(46.2)
(1,033.2)
—
—
0.1
12.6
—
0.5
—
7.7
(47.6)
(2.2)
—
—
—
—
—
561.1
—
(79.1)
(1,035.2)
0.5
(16.1)
539.6
—
(2.2)
(20.8)
(11.8)
(1,121.0)
561.1
(592.5)
(302.4)
455.5
(26.6)
—
(2.5)
3.7
127.7
—
99.8
164.2
(0.5)
1.9
—
(6.3)
—
—
(4.9)
—
0.3
2.0
2.3
(144.9)
469.3
—
—
563.6
0.9
888.9
(0.9)
(220.2)
728.0
—
—
—
—
(561.1)
—
(447.8)
926.7
(26.6)
(6.3)
—
4.6
(561.1)
450.6
—
—
—
(0.9)
(120.1)
894.2
$
507.8
$
— $
774.1
Cash and cash equivalents, end of period
$
264.0
$
F-59
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2010
(in millions)
Net cash provided by (used in) operating activities of
continuing operations
$
(454.0) $
65.6
$
(221.7) $
— $
(610.1)
Terex
Corporation
Wholly-
owned
Guarantors
Non-
guarantor
Subsidiaries
Intercompany
Eliminations
Consolidated
Cash flows from investing activities
Capital expenditures
Acquisition of business net of cash acquired
Other investments
Proceeds from disposition of discontinued
operations
Investments in derivative securities
Proceeds from sale of assets
Intercompany investing activities
Net cash provided by (used in) investing activities of
continuing operations
Cash flows from financing activities
Repayments of debt
Proceeds from issuance of debt
Payment of debt issuance costs
Purchase of noncontrolling interest
Distributions to noncontrolling interest
Intercompany financing activities
Other financing activities, net
Net cash provided by (used in) financing activities of
continuing operations
Cash flows from discontinued operations
Net cash used operating activities of discontinued
operations
Net cash provided by in investing activities of
discontinued operations
Net cash provided by financing activities of
discontinued operations
Net cash (used in) discontinued operations
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
(8.7)
(12.8)
(14.6)
294.8
(21.1)
2.4
(17.9)
222.1
(159.3)
—
(6.0)
—
—
—
1.3
(10.6)
—
—
—
—
1.4
—
(35.7)
—
(4.7)
707.2
—
6.2
—
(9.2)
673.0
(51.6)
—
(0.8)
—
(0.2)
—
(0.1)
(154.6)
73.9
(1.0)
(12.9)
(3.2)
17.9
(1.2)
—
—
—
—
—
—
17.9
17.9
—
—
—
—
—
(17.9)
—
(55.0)
(12.8)
(19.3)
1,002.0
(21.1)
10.0
—
903.8
(365.5)
73.9
(7.8)
(12.9)
(3.4)
—
—
(164.0)
(52.7)
(81.1)
(17.9)
(315.7)
(19.3)
(2.2)
(31.6)
—
—
(19.3)
—
(415.2)
579.4
—
—
(2.2)
—
1.5
0.5
2.0
0.1
—
(31.5)
(2.0)
336.7
391.3
—
—
—
—
—
—
—
(53.1)
0.1
—
(53.0)
(2.0)
(77.0)
971.2
894.2
$
728.0
$
— $
Cash and cash equivalents, end of period
$
164.2
$
F-60
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Year ended December 31, 2012
Deducted from asset accounts:
Allowance for doubtful accounts
Reserve for inventory
Valuation allowances for deferred tax assets
Totals
Year ended December 31, 2011
Deducted from asset accounts:
Allowance for doubtful accounts
Reserve for inventory
Valuation allowances for deferred tax assets
Totals
Year ended December 31, 2010
Deducted from asset accounts:
Allowance for doubtful accounts
Reserve for inventory
Valuation allowances for deferred tax assets
Totals
(Amounts in millions)
Additions
Balance
Beginning
of Year
Charges to
Earnings
Other (1)
Deductions (2)
Balance End
of Year
$
$
$
$
$
$
42.5
120.1
183.3
345.9
46.8
106.7
157.6
311.1
60.1
110.8
134.6
305.5
$
$
$
$
$
$
5.7
36.0
14.2
55.9
13.6
53.4
18.1
85.1
12.3
44.6
35.1
92.0
$
$
$
$
$
$
(6.3) $
15.3
(25.3)
(16.3) $
(9.0) $
(1.8)
7.6
(3.2) $
(9.5) $
(6.3)
(12.1)
(27.9) $
(3.1) $
(35.8)
—
(38.9) $
(8.9) $
(38.2)
—
(47.1) $
(16.1) $
(42.4)
—
(58.5) $
38.8
135.6
172.2
346.6
42.5
120.1
183.3
345.9
46.8
106.7
157.6
311.1
(1)
Primarily represents the impact of foreign currency exchange, purchase accounting adjustments for deferred tax assets
and business divestitures.
(2)
Primarily represents the utilization of established reserves, net of recoveries.
F-61
EXHIBIT 12
TEREX CORPORATION
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(amounts in millions)
EARNINGS
Income (loss) from continuing operations before
income taxes
Adjustments:
Undistributed (income) loss of less than 50%
owned investments
Fixed charges
Earnings (loss)
FIXED CHARGES
2012
2011
2010
2009
2008
Year Ended December 31,
$ 155.6
$
84.5
$ (238.3)
$ (523.8)
$
84.0
(2.3)
283.7
$ 437.0
(3.5)
171.2
$ 252.2
(1.3)
173.1
$ (66.5)
(0.3)
148.0
$ (376.1)
(2.1)
124.3
$ 206.2
Interest expense, including debt discount
amortization
Amortization/writeoff of debt issuance costs
Portion of rental expense representative of interest
factor (assumed to be 33%)
Fixed charges
164.6
92.6
134.9
15.8
145.4
9.3
119.4
8.3
102.5
3.2
26.5
$ 283.7
20.5
$ 171.2
18.4
$ 173.1
20.3
$ 148.0
18.6
$ 124.3
RATIO OF EARNINGS TO FIXED CHARGES
1.5 x
1.5 x
— (1)
— (1)
1.7 x
AMOUNT OF EARNINGS DEFICIENCY FOR
COVERAGE OF FIXED CHARGES
$ —
$ —
$ 239.6
$ 524.1
$ —
(1) Less than 1.0x
Exhibit 31.1
CERTIFICATION
I, Ronald M. DeFeo, certify that:
1.
I have reviewed this annual report on Form 10-K 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: February 27, 2013
/s/ Ronald M. DeFeo
Ronald M. DeFeo
Chairman and
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Phillip C. Widman, certify that:
1.
I have reviewed this annual report on Form 10-K 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: February 27, 2013
/s/ Phillip C. Widman
Phillip C. Widman
Senior Vice President 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
Exhibit 32
In connection with the annual report of Terex Corporation (the “Company”) on Form 10-K for the period ended December 31,
2012 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 Phillip C. Widman, 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)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, and
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
February 27, 2013
/s/ Phillip C. Widman
Phillip C. Widman
Senior Vice President and
Chief Financial Officer
February 27, 2013
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.
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
THE TEREX WAY DESCRIBES THE VALUES AND BELIEFS
THAT GUIDE OUR ACTIONS AND BEHAVIORS.
INTEGRITY
Integrity reflects honesty, ethics, transparency and accountability.
We are committed to maintaining high ethical standards in all of
our business dealings.
RESPECT
Respect incorporates concern for safety, health, teamwork, diversity,
inclusion and performance. We treat all our team members, customers
and suppliers with respect and dignity.
IMPROVEMENT
Improvement encompasses quality, problem-solving systems, a
continuous improvement culture and collaboration. We continuously
search for new and better ways of doing things, focusing on
continuous improvement and the elimination of waste.
SERVANT
LEADERSHIP
Servant leadership requires service to others, humility, authenticity
and leading by example. We work to serve the needs of our
customers, investors and team members.
COURAGE
Courage entails willingness to take risks, responsibility, action and
empowerment. We have the courage to make a difference even when
it is difficult.
CITIZENSHIP
Citizenship means social responsibility and environmental stewardship.
We comply with all laws and we respect all peoples’ values and
cultures and are good global, national and local citizens.
SHAREHOLDER INFORMATION
Transfer Agent And Registrar
American Stock Transfer & Trust Company
59 Maiden Lane, Plaza Level
New York, New York 10038
800-937-5449
718-921-8124
Shareholders seeking information concerning stock
transfers, change of addresses and lost certificates
should contact the Company’s stock transfer agent
directly. American Stock Transfer & Trust Company
may also be contacted at www.amstock.com.
Stock Information
Stock Symbol: TEX
Stock Exchange:
New York Stock Exchange
The high and low quarterly sales prices for the past
two years of Terex Corporation are as follows:
2012
Q1
Q2
Q3
Q4
HIGH
26.77
25.34
26.20
28.33
LOW
14.10
14.89
14.05
20.41
2011
Q1
Q2
Q3
Q4
HIGH
38.50
38.43
29.87
18.51
LOW
28.19
24.59
10.21
9.30
Annual Report / Form 10-K
Copies of the Annual Report / Form 10-K are available
from Terex corporate headquarters by calling Investor
Relations at +1 203-222-5942, or by visiting the
Investor Relations section of the Terex Corporation
website at www.terex.com.
Annual Meeting
The Annual Meeting of Shareholders will be held at
10:00 a.m. (Eastern Time) on Thursday, May 9, 2013
at Terex Corporation, 200 Nyala Farm Road, Westport,
Connecticut, USA.
For additional information about our Company and our
extensive line of products, please visit our website at
www.terex.com.
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This Annual Report contains forward-looking information based on current expectations of Terex. Because forward-looking statements involve risks and uncertainties, actual results could differ materially. For a more
detailed description of such risks and uncertainties, see the Terex Annual Report on Form 10-K, included with this Annual Report, under the headings “Risk Factors” and “Forward Looking Information.” The forward-looking
statements contained herein speak only as of the date of this Annual Report. Terex expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained in this Annual Report to
reflect any change in its expectations. This Annual Report refers to various non-GAAP (U.S. generally accepted accounting principles) financial measures. The non-GAAP measures may not be comparable to similarly titled
measures being disclosed by other companies. Terex believes that this information is useful to understanding its operating results and the ongoing performance of its underlying businesses. See the Investor Relations
section of Terex’s website www.terex.com for a complete reconciliation of such measures. The photographs, products and services included in this Annual Report may be trademarks, service marks or trade-names of Terex
Corporation and/or its subsidiaries in the USA and other countries and all rights are reserved. Terex is a Registered Trademark of Terex Corporation in the USA and many other countries. Copyright 2013 Terex Corporation.
terex corporation
200 nyala farm road
Westport, ct 06880, usa
tel: +1 203-222-7170
www.terex.com
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AnnuAl RepoRt
2012
Leadership improvement performance resuLts