Terex Achieves Record Net Income and Sales in 2006

February 15, 2007 • Westport, Conn.-based Terex Corp. has released its fourth quarter 2006 and full year financial results for 2006. Over the past year, the company has experienced record net sales and net income, as well as historically low debt.

 

Terex's net income for the fourth quarter of 2006 was $100.9 million, or $0.97 per share, compared to net income of $34.8 million, or $0.34 per share, for the fourth quarter of 2005. Net sales for Terex totaled $2.03 billion in the fourth quarter of 2006, an increase of 29.4% from $1.56 billion of the previous year. Debt, less cash and cash equivalents, decreased by $277 million from September 30, 2006, levels, reflecting strong income from operations and decreased working capital, offset by period capital expenditures. All per share amounts are on a fully diluted basis.

 

For the full year 2006, Terex reported net income of $399.9 million, or $3.88 per share, compared to net income of $188.5 million, or $1.84 per share, from last year. Net income for 2006 included a $23.3 million pretax charge related to the early extinguishment of Terex's 10-3/8% senior subordinated notes and its previous senior bank credit facilities, which negatively impacted earnings per share by $0.15, and a loss on the disposition of the Tatra heavy duty on- and off-road truck business, net of tax, of $7.7 million, which negatively impacted earnings per share by $0.07. Net sales for Terex totaled $7.65 billion in 2006, an increase of 24.2% from $6.16 billion in 2005. Debt, less cash and cash equivalents, decreased by $483.9 million from December 31, 2005,levels.

 

"2006 was a year of significant progress on many fronts," commented Ronald M. DeFeo, Terex chairman and chief executive officer. "Financially, we experienced record net sales and net income, and our debt less cash and cash equivalents of $86 million is at a historic low. We retired $500 million of our high cost notes, including the $200 million in notes retired this past January, and substantially strengthened our balance sheet. Return on invested capital, or ROIC, continues to be the unifying metric we use to measure our operating performance. In 2006, we achieved a record ROIC of 38.4%, compared to 21.5% ROIC in 2005 and our 2006 ROIC target of 27.5%."

 

Aerial Work Platforms

Net sales for the Terex Aerial Work Platforms segment for the fourth quarter of 2006 increased $118.4 million to $514.0 million • a 30% increase from the $395.6 million reported in the fourth quarter of 2005. The increase in net sales was driven by continued strong order activity from the rental channel and increasing demand from international markets, despite slowing demand for telehandlers and trailer-mounted aerial lifts. Gross margin for the quarter was 24.1%, compared to 21.7% for the quarter ended December 31, 2005, and was favorably impacted by volume increases of higher margin products combined with the impact of prior pricing actions. Fourth quarter expenses rose to $40.6 million compared to $27.9 million for the fourth quarter of 2005, due to the costs of additional resources needed to address higher sales levels combined with expenses related to expanding the international sales and service infrastructure. Income from operations increased to $83.5 million, or 16.2% of net sales, in the fourth quarter of 2006, from $57.8 million, or 14.6% of net sales, in the fourth quarter of 2005.

 

"Solid fourth quarter results capped a record year of growth and profitability," said Tim Ford, president • Terex Aerial Work Platforms. "The fourth quarter is usually the slowest quarter of the year for aerial work platforms, as our rental customers typically prefer deliveries that match the construction season. But in the fourth quarter, we found that strong demand continued domestically and abroad. Weakness in telehandler sales, particularly the smaller machines that are used for residential construction, was more than offset by solid demand for aerial lifts. The strong operating margin of 17.8% for 2006, as compared to 12.9% for 2005, directly reflects the hard work and success of our Terex team members, who continue to improve production efficiency and product design through the utilization of lean techniques.

 

“International demand was robust, with one-third of our net sales generated outside of the United States, with profitability on international sales aided by a favorable foreign exchange rate stemming from the relatively weaker U.S. Dollar. We are on track to begin production of a Z-boom model at our facility in Italy during the first quarter of 2007 as part of our longer term strategy for meeting European demand with European-based production."

Cranes

Net sales in the Terex Cranes segment for the fourth quarter of 2006 increased $153.9 million to $501.8 million from $347.9 million in the fourth quarter of 2005, reflecting improvement in all crane product categories and expansion in Asian markets. Terex's acquisition of a controlling 50% interest in a Chinese crane manufacturer in April 2006 accounted for approximately 18% of the growth in net sales in the fourth quarter. Gross margin for the quarter was 19.0%, compared to 16.4% for the fourth quarter of 2005, and was favorably impacted by pricing actions and volume leverage on manufacturing costs, partially offset by certain cost pressures from suppliers' difficulty meeting market demand.

 

SG&A expenses increased in the fourth quarter of 2006, mainly due to increased investment in sales and administrative infrastructure to support the increasing sales, to $42.5 million, or 8.5% of net sales, as compared to the fourth quarter of 2005 rate of 8.9% of net sales on $31.1 million of SG&A expenses. Income from operations increased $26.6 million to $52.7 million, or 10.5% of net sales, for the fourth quarter of 2006, from $26.1 million, or 7.5% of net sales, for the fourth quarter of 2005.

 

"The Terex Cranes segment had a terrific quarter, achieving an operating margin in excess of 10% for the first time in many years. Additionally, revenue growth continued to be robust, increasing over 44% versus the comparable period in the prior year, highlighting the continued increasing global demand for our products and our improving ability to meet this demand," commented Steve Filipov, president • Terex Cranes. "More importantly, operating profit for the quarter grew approximately 102% versus the prior year's results. Performance improvements continued to come from all of our businesses, with all product lines contributing significantly, and illustrate the value of our diverse portfolio of lifting equipment and our global manufacturing footprint. Our Chinese operation, Sichuan Changjiang Engineering Crane Co., Ltd., had strong results this quarter, and we remain excited about the future for this business and Terex Cranes in China."

 

"Our backlog, besides highlighting the strong business environment in which we operate, also illustrates issues that we continue to face as we increase our production schedule,” Filipov continued. “Our customers need our products right away, and we continue to struggle with the limited supply of certain components. We are working diligently to eliminate the production bottlenecks at our various locations and to better utilize the space we have and implement lean principles in order to improve overall production rates."