15 1203 credit suisse industrials conference
TRANSCRIPT
Credit Suisse Industrials Conference
December 3, 2015
Forward-Looking Statements
& Non-GAAP Measures
2
This presentation contains forward-looking information regarding future events or the Company’s future financial performance based on the current expectations of Terex Corporation. In addition, when included in this presentation, the words “may,” “expects,” “intends,” “anticipates,” “plans,” “projects,” “estimates” and the negatives thereof and analogous or similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statement is not forward-looking. The Company has based these forward-looking statements on current expectations and projections about future events. These statements are not guarantees of future performance. Because forward-looking statements involve risks and uncertainties, actual results could differ materially. Such risks and uncertainties, many of which are beyond the control of Terex, include among others: Our business is cyclical and weak general economic conditions affect the sales of our products and financial results; the effect of the announcement and pendency of the merger on our customers, employees, suppliers, vendors, distributors, dealers, retailers, operating results and business generally, and the diversion of management’s time and attention while the proposed merger is pending; our ability to successfully integrate acquired businesses; our ability to access the capital markets to raise funds and provide liquidity; our business is sensitive to government spending; our business is highly competitive and is affected by our cost structure, pricing, product initiatives and other actions taken by competitors; impairment of the carrying value of goodwill and other indefinite-lived intangible assets; a material disruption to one of our significant facilities; 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; our ability to obtain parts and components from suppliers on a timely basis at competitive prices; 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 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 corporation, including compliance with changing regulatory environments, the Foreign Corrupt Practices Act and other similar laws, and political instability; possible work stoppages and other labor matters; compliance with changing laws and regulations, particularly environmental and tax laws and regulations; litigation, product liability claims, intellectual property claims, class action lawsuits and other liabilities; our ability to comply with an injunction and related obligations imposed by the United States Securities and Exchange Commission (“SEC”); disruption or breach in our information technology systems; and other factors, risks and uncertainties that are more specifically set forth in our public filings with the SEC. Non-GAAP Measures: Terex from time to time refers to various non-GAAP (generally accepted accounting principles) financial measures in this presentation. Terex believes that this information is useful to understanding its operating results and the ongoing performance of its underlying businesses without the impact of special items. See the appendix at the end of this presentation as well as the Terex third quarter 2015 earnings release on the Investor Relations section of our website www.terex.com for a description and/or reconciliation of these measures.
3
Continuing to Deliver Solid Results in a
Challenging Environment
Notable year-on-year improvements in the quarter:
• AWP and MP continued to improve profitability, delivering strong incremental
margins in the quarter
• Operating margin up 70 basis points, on an adjusted basis
• Bookings up in AWP, Cranes, MHPS and MP
Shifting global market conditions:
• US market remains flat, negatively impacted by oil and gas investment
• European markets mixed
• China growth slowing, Brazil falling, Australia flat to down
• Pricing remains a headwind, but benefiting from material cost reductions
4
Net Sales Bridge Q3-14 to Q3-15
USD Millions
800
1,000
1,200
1,400
1,600
1,800
1,810
(25)(27)
(8) (102)
3 (10)
1,641
Q3 Net Sales
5
OP Bridge Q3-14 to Q3-15
USD Millions
*As adjusted
AWP
Construction
Cranes
MHPS
MP
Terex Total
40
60
80
100
120
140
128 127
11 (5)
8
1(17)
1
Q3 Operating Profit*
11.4%
0.8%
5.2%6.0% 5.6%
7.0%
13.8%
1.5%
4.1%3.0%
10.7%
7.7%
0%
4%
8%
12%
16%
AWP Construction Cranes MHPS MP Terex Total
Operating Margin* Q3-14 Q3-15
In Summary
6
• Solid performance in a challenging environment
• Staying focused on internal improvement initiatives and taking
steps to align business structures with markets
• Full year outlook at or near the low end of the previously
announced earnings guidance
• Merger with Konecranes progressing, targeting a first-half
2016 close
Questions?
7
Appendix
8
Q3 Continuing Operations Results
9
USD Millions, except Earnings per Share
*Please see reconciliation to US GAAP on pages 20 and 24
Q3 2015
As Reported
Q3 2015
As Adjusted*
Q3 2014
As Reported
Q3 2014
As Adjusted*
Net Sales $1,641.3 $1,641.3 $1,809.8 $1,809.8
% Change Q3 2014 (9.3%) (9.3%)
Gross Profit 336.6 342.8 357.3 367.4
Gross Margin 20.5% 20.9% 19.7% 20.3%
SG&A (224.7) (216.0) (240.5) (239.9)
% Net Sales (13.7%) (13.2%) (13.3%) (13.3%)
Income From Operations 111.9 126.8 116.8 127.5
Operating Margin 6.8% 7.7% 6.5% 7.0%
Other Income (Expense) - Net (35.0) (26.4) (30.4) (27.8)
Effective Tax Rate 40.1% 35.6% 32.1% 32.0%
Earnings per Share $0.41 $0.58 $0.51 $0.59
EBITDA $137.4 $152.3 $153.2 $163.9
% Net Sales 8.4% 9.3% 8.5% 9.1%
Net Working Capital $1,829.8 $1,876.1
As a % of annualized sales 27.9% 25.9%
ROIC 9.7% 9.8%
Q3 Liquidity Bridge
10
USD Millions
Free Cash Flow
$62 million TFS Net Cash
Impact
($24) million
200
400
600
800
1,000
818
87(85)
(25)
2734 (7) (12) (8)
829
*
*Net cash provided by operating activities plus increase in TFS assets, plus decrease in cash for securitization settlement
North America Western Europe
Asia/ Oceania
Other
LATAM
Sales by Geography 2015 vs 2014
11
(2)%
(20)%
(21)%
(17)%
Q3 FX-Adj.
Q3
Q3
Q3
Q3 (1)%
FX-Adj.
FX-Adj.
FX-Adj.
FX-Adj.
3%
12%
5%
30%
12%
10%5%
43%
2015 Q3
Western Europe
Asia/ Oceania
Other
LATAM
North America
33%
13%
8%6%
40%
2014 Q3
13%
(2)%
31%
(10)%
(3)%
Aerial Work Platforms
12
USD Millions
304 637 571 517 342 451 799 603 382 936 500 374 439
70%
177%
114%
87%
65%
97%
139%
85%
65%
207%
100%
56%
80%
0%
50%
100%
150%
200%
250%
0
200
400
600
800
1,000
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Net Bookings Book-to-Bill Ratio
312
214
298
150
200
250
300
350
2013 2014 2015
Q3 Backlog (<12 mo.)
• Solid backlog
and book-to-bill
• Some softening
in NA, pricing
and currency
are headwinds
• Benefits from
material cost
and productivity
Construction
13
• Dumpers and concrete products
backlog up year on year
• Terex® Fuchs material handlers
flat to prior year
• Compact
equipment
businesses in
India and
Germany
remain weak
USD Millions
164 237 184 194 139 224 223 183 128 191 198 122 109
82%
130%
95%93%
82%
127% 126%
89%
69%
103%
149%
75%
71%
0%
20%
40%
60%
80%
100%
120%
140%
160%
0
50
100
150
200
250
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Q1'14
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q3'15
Net Bookings Book-to-Bill Ratio
95
123 119
25
9
50
100
150
2013 2014 2015
Q3 Backlog (<12 mo.)
ASV
120
132
Cranes
14
• Encouraging booking
activity in tower cranes
and European mobile
cranes
• Utilities business
steady, but some signs
of softening
• Global crane market
remains challenging
USD Millions
*
357 473 458 460 363 512 533 499 286 457 375 433 303
70%
93% 98%89%
81%
108%
138%
100%
69%
97% 98% 95%
76%
0%
20%
40%
60%
80%
100%
120%
140%
160%
0
100
200
300
400
500
600
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Net Bookings Book-to-Bill Ratio
485
552
427
200
300
400
500
600
2013 2014 2015
Q3 Backlog (<12 mo.)
665 631 532
162120
44
200
300
400
500
600
700
800
900
2013 2014 2015
Q3 Backlog (<12 mo.)
PortAutomation
827
751
576
Material Handling & Port Solutions
USD Millions
396 374 496 393 510 375 398 418 303 354 309 395 335
90% 90%
148%
107%
112%
71%
109%
98%
66% 70%
97%
109%
93%
0%
20%
40%
60%
80%
100%
120%
140%
160%
0
100
200
300
400
500
600
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Net Bookings Book-to-Bill Ratio
• Material Handling
backlog steady on
FX neutral basis
• Sluggish Port
Equipment market
with some
momentum in mobile
harbor cranes
15
Materials Processing
16
• Integrating new acquisitions
• Benefiting from material costs,
pricing is a headwind
• Persistent weakness in mining
sector remains a headwind
131 155 168 151 139 159 163 174 144 153 171 135 155
87%
103%110%
86%94%
106% 109%
96% 93%98%
119%
81%
99%
0%
20%
40%
60%
80%
100%
120%
140%
0
40
80
120
160
200
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2*
'15
Q3
'15
Net Bookings Book-to-Bill Ratio
52 55
62
30
35
40
45
50
55
60
65
2013 2014 2015
Q3 Backlog (<12 mo.)
Backlog Trend
Backlog shown is less than 12 months
USD Millions
17
$ % $ %
Terex (353) (19%) (222) (13%)
MP (2) (3%) 7 12%
MHPS (55) (9%) (175) (23%)
Cranes (113) (21%) (125) (23%)
Constr. (45) (27%) (13) (10%)
AWP (138) (32%) 84 39%
Sequential
Change
Year on Year
Change
312 295
523 418
214
698 699
436 298
120 166
214
188
132
138 204
164
119
485501
673
661
552
539563
540
427
827 805
879
865
751
575
596
631
576
52 61
75
67
55
51
79
64
62
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
AWP Construction Cranes MHPS MP
2,141
1,704
2,001
1,8351,828
2,364
2,199
1,796
1,482
$ %
Terex (101) (6%)
MP 11 20%
MHPS (120) (16%)
Cranes (94) (17%)
Constr. (6) (5%)
AWP 108 50%
Year on Year
Change
312 295
523 418
214
698 699
436 322
120 166
214
188
132
138 204
164
126
485501
673
661
552
539563
540
458
827 805
879
865
751
575
596
631
631
52 61
75
67
55
51
79
64
66
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
AWP Construction Cranes MHPS MP
2,141
1,704
2,001
1,8351,828
2,3642,199
1,796
1,603
Backlog Trend – Currency Neutral
- Currency Neutral
USD Millions
18 Backlog shown is less than 12 months
YTD Continuing Operations Results
19
USD Millions, except Earnings per Share
YTD Q3 2015
As Reported
YTD Q3 2015
As Adjusted*
YTD Q3 2014
As Reported
YTD Q3 2014
As Adjusted*
Net Sales $4,965.4 $4,965.4 $5,519.5 $5,519.5
% Change YTD 2014 (10.0%) (10.0%)
Gross Profit 997.4 1,003.6 1,114.5 1,124.6
Gross Margin 20.1% 20.2% 20.2% 20.4%
SG&A (693.0) (684.3) (761.8) (761.2)
% Net Sales (14.0%) (13.8%) (13.8%) (13.8%)
Income From Operations 304.4 319.3 352.7 363.4
Operating Margin 6.1% 6.4% 6.4% 6.6%
Other Income (Expense) (98.1) (89.5) (94.9) (92.3)
Effective Tax Rate 36.5% 34.9% 30.7% 30.8%
Earnings per Share $1.17 $1.34 $1.55 $1.63
EBITDA $396.2 $411.1 $464.5 $475.2
% Net Sales 8.0% 8.3% 8.4% 8.6%
Net Working Capital $1,829.8 $1,876.1
As a % of annualized sales 27.9% 25.9%
ROIC 9.7% 9.8%
*Please see reconciliation to US GAAP on pages 21 and 25
Q3 2015 Adjustments
20
Net Sales $1,641.3 — — — $1,641.3
Gross Profit 336.6 — 3.7 2.5 342.8
SG&A (224.7) — 8.7 (216.0)
Income From Operations 111.9 — 12.4 2.5 126.8
Interest Income (Expense) (23.6) — — — (23.6)
Other Income (Expense) (11.4) 8.6 — — (2.8)
Income (Loss) from Cont. Ops before Taxes 76.9 8.6 12.4 2.5 100.4
Benefit from (Provision for) Income Taxes (30.8) (0.7) (3.3) (0.9) (35.7)
Non Controlling Interest (1.3) — — — (1.3)
Income (Loss) from Continuing Operations $44.8 7.9 9.1 1.6 $63.4
Earnings per Share $0.41 0.07 0.08 0.02 $0.58
Q3 2015
As Adjusted
Product
Campaign
Restructuring &
Related
Merger
Related
Q3 2015
As Reported
USD Millions, except Earnings per Share
YTD 2015 Adjustments
21
Net Sales $4,965.4 — — — $4,965.4
Gross Profit 997.4 — 3.7 2.5 1,003.6
SG&A (693.0) — 8.7 — (684.3)
Income From Operations 304.4 — 12.4 2.5 319.3
Interest Income (Expense) (76.8) — — — (76.8)
Other Income (Expense) (21.3) 8.6 — — (12.7)
Income (Loss) from Cont. Ops before Taxes 206.3 8.6 12.4 2.5 229.8
Benefit from (Provision for) Income Taxes (75.4) (0.7) (3.3) (0.9) (80.3)
Non Controlling Interest (3.0) — — — (3.0)
Income (Loss) from Continuing Operations $127.9 7.9 9.1 1.6 $146.5
Earnings per Share $1.17 0.07 0.08 0.02 $1.34
YTD 2015
As Reported
Merger
Related
Restructuring &
Related
Product
Campaign
YTD 2015
As Adjusted
USD Millions, except Earnings per Share
Q3 2015 Adjusted OP by Segment
USD Millions
22
Q3 2015 Gross Q3 2015
As Reported Profit As Adjusted
AWP 79.4 — — 79.4
Construction 2.7 — — 2.7
Cranes 12.4 3.8 0.6 16.8
MHPS 10.3 — 0.6 10.9
MP 13.9 2.4 0.7 17.0
Corporate (6.8) — 6.8 0.0
Consolidated 111.9 6.2 8.7 126.8
SG&A
YTD 2015 Adjusted OP by Segment
USD Millions
23
YTD 2015 Gross YTD 2015
As Reported Profit As Adjusted
AWP 226.6 — — 226.6
Construction (1.1) — — (1.1)
Cranes 38.6 3.8 0.6 43.0
MHPS 7.3 — 0.6 7.9
MP 46.6 2.4 0.7 49.7
Corporate (13.6) — 6.8 (6.8)
Consolidated 304.4 6.2 8.7 319.3
SG&A
Q3 2014 Adjustments
24
Q3 2014 Q3 2014
As Reported As Adjusted
Net Sales $1,809.8 — — $1,809.8
Gross Profit 357.3 10.1 — 367.4
SG&A (240.5) 0.6 — (239.9)
Income From Operations 116.8 10.7 — 127.5
Interest Income (Expense) (26.5) — — (26.5)
Other Income (Expense) (3.9) — 2.6 (1.3)
Income (Loss) from Cont. Ops before Taxes 86.4 10.7 2.6 99.7
Benefit from (Provision for) Income Taxes (27.7) (3.3) (0.9) (31.9)
Non Controlling Interest — — — —
Income (Loss) from Continuing Operations $58.7 $7.4 $1.7 $67.8
Earnings per Share $0.51 $0.06 $0.02 $0.59
Debt
Refinance
Restructuring &
Related - MHPS
USD Millions, except Earnings per Share
YTD 2014 Adjustments
25
YTD 2014 YTD 2014
As Reported As Adjusted
Net Sales $5,519.5 — — $5,519.5
Gross Profit 1,114.5 10.1 — 1,124.6
SG&A (761.8) 0.6 — (761.2)
Income From Operations 352.7 10.7 — 363.4
Interest Income (Expense) (86.1) — — (86.1)
Other Income (Expense) (8.8) — 2.6 (6.2)
Income (Loss) from Cont. Ops before Taxes 257.8 10.7 2.6 271.1
Benefit from (Provision for) Income Taxes (79.2) (3.3) (0.9) (83.4)
Non Controlling Interest 0.5 — — 0.5
Income (Loss) from Continuing Operations $179.1 $7.4 $1.7 $188.2
Earnings per Share $1.55 $0.06 $0.02 $1.63
Restructuring &
Related - MHPS
Debt
Refinance
USD Millions, except Earnings per Share
Q3 2014 Adjusted OP by Segment
USD Millions
26
Q3 2014 Gross Q3 2014
As Reported Profit As Adjusted
AWP 68.4 — — 68.4
Construction 1.6 — — 1.6
Cranes 21.8 — — 21.8
MHPS 17.6 10.1 0.6 28.3
MP 8.7 — — 8.7
Corporate (1.3) — — (1.3)
Consolidated 116.8 10.1 0.6 127.5
SG&A
YTD 2014 Adjusted OP by Segment
USD Millions
27
YTD 2014 Gross YTD 2014
As Reported Profit As Adjusted
AWP 264.1 — — 264.1
Construction 0.6 — — 0.6
Cranes 51.3 — — 51.3
MHPS 14.0 10.1 0.6 24.7
MP 42.4 — — 42.4
Corporate (19.7) — — (19.7)
Consolidated 352.7 10.1 0.6 363.4
SG&A