Terex Corporation

Terex Sees Improved Net Sales in 2013 with Expectations for Continued Growth in 2014

Terex Corporation announced  fourth quarter of 2013 income from continuing operations equaled net sales of $1.8 billion compared to net sales of $1.6 billion for the fourth quarter of 2012. The company expects 2014 net sales of between $7.3 billion and $7.7 billion.

According to Terex, 2013 had income from continuing operations of $209.0 million, or $1.79 per share, on net sales of $7.1 billion for the full year 2013, as compared to income from continuing operations of $77.0 million, or $0.68 per share, on net sales of $7.0 billion for the full year 2012. Excluding certain items, income from continuing operations as adjusted for the full year 2013 was $261.2 million or $2.23 per share compared to $179.5 million or $1.58 per share in 2012.

For the fourth quarter of 2013 income from continuing operations was $84.8 million, or $0.72 per share, on net sales of $1.8 billion, compared to a loss from continuing operations of $33.2 million, or $0.30 per share, on net sales of $1.6 billion, for the fourth quarter of 2012. Excluding certain items, income from continuing operations as adjusted was $76.8 million, or $0.65 per share in 2013 compared to $19.4 million, or $0.17 per share in 2012.

“Overall, 2013 was a good year and I am pleased with the improvements and progress underway at Terex,” commented Ron DeFeo, Terex Chairman and CEO. “This past year was a tale of two halves, with the second half of the year significantly stronger than the first half. Our performance in the second half was fueled by the continued strength of our Aerial Work Platforms (AWP) segment and a turnaround in our Materials Handling & Port Solutions (MHPS) segment. Our focus throughout the year on strengthening margins and driving financial efficiency helped deliver a strong close to the year.

“Operationally, our AWP segment is continuing to benefit from strong North American rental channel demand plus a noticeable pickup in Latin America and European performance. Additionally, the Materials Processing (MP) segment performance remains solid, delivering double digit operating margin in 2013 despite a relatively soft demand environment. These business segments performed well in 2013 and we expect even better performance in 2014. The remaining three segments did not meet our expectations in 2013. However, we have made good progress with the integration of our MHPS segment and we expect continued progress in 2014. The pending sale of our off highway truck business results in a smaller and more focused construction portfolio. We have confidence we can improve the financial profile of this segment going forward. Lastly, our cranes segment failed to realize the growth that we had anticipated entering 2013. While new product launches did provide some growth, markets such as Australia, Europe and Latin America were more challenging than anticipated.”

Mr. DeFeo continued, “During 2013, we made investments and implemented actions to set us on a course toward increased profitability in 2014 and beyond. We enter 2014 with optimism around our businesses and expectations to deliver improved financial results. Much of this optimism stems from our continued focus on internal areas of improvement, such as our capital structure initiatives and business simplification, as well as the year over year benefits anticipated from the restructuring efforts undertaken in 2013.”

Outlook

The company expects 2014 earnings per share to be between $2.50 and $2.80 (excluding restructuring and other unusual items) on net sales of between $7.3 billion and $7.7 billion.

“Our 2014 guidance reflects the benefits of internal cost initiatives, capital structure improvements and some anticipated net sales growth," DeFeo says. "The guidance is for continuing operations, and as such excludes the earnings associated with the off-highway truck business due to its impending sale. We see some signs of improvement in many parts of the world although this is tempered with some continued market uncertainty, particularly in developing markets. Overall, we believe that the global economy will be stronger in 2014, but still modest when viewed against historic demand levels.”

Capital Structure: The company’s liquidity at December 31, 2013 decreased by approximately $30 million compared to September 30, 2013 and totaled $736.2 million, which comprised cash of $408.1 million and borrowing availability under the company’s revolving credit facilities of $328.1 million. The decrease was mainly due to investments in capital expenditures and the repurchase of Terex Common Stock during the quarter. Debt, less cash and cash equivalents, increased approximately $148 million to $1,568.6 million compared to December 31, 2012 primarily as a result of the purchase of minority shares of Terex Material Handling & Port Solutions AG.

"Over the past 12 months we have reduced our debt and also lowered the interest rates on our term loans, yielding a meaningful reduction in interest expense from 2012," says Kevin Bradley, Terex Senior Vice President and Chief Financial Officer. "In January 2014, we completed the squeeze out of the remaining outstanding minority shares of Terex Material Handling & Port Solutions AG, and now have attained 100 percent ownership. This simplifies our capital structure by eliminating the obligation to make guaranteed payments to the minority shareholders and also removes the complexity and financial cost of maintaining the entity as a German public company.”

"We initiated a quarterly dividend and also announced a share repurchase program of up to $200 million," Bradley says. "During the fourth quarter we began to take action under this program, purchasing approximately 0.8 million shares for approximately $30 million. Overall, we are pleased with the evolution of our capital structure and shareholder returns, and will continue to focus on cash flow generation throughout 2014.”

Return on Invested Capital (ROIC) was 8.1 percent for the period ended December 31, 2013.

Taxes: The effective tax rate was 21 percent for the fourth quarter of 2013 and 30 percent for the full year as compared to an effective tax rate of 22.6 percent for the fourth quarter of 2012 and 40.8 percent for the full year.

Working Capital: Working Capital as a percent of Trailing Three Month Annualized Net Sales was 24.8 percent at December 31, 2013, as compared to 26.9 percent at December 31, 2012.

Backlog: Backlog for orders deliverable during the next twelve months was approximately $1,828 million at December 31, 2013, an increase of approximately 1.8 percent from September 30, 2013 and a decrease of approximately 7.5 percent from December 31, 2012. The majority of the year over year decline was related to AWP backlog, driven by the timing of orders received from one of our larger rental customers, and lower demand for crane products. This was partially offset by existing large port equipment orders for MHPS, which are now deliverable in the next 12 months.

Discontinued Operations: The results of the off-highway rigid and articulated haul trucks business are classified as Discontinued Operations in the financial statements.

 

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