Q2 2016 Conference Call - s22.q4cdn.com · Q2 Operating Results USD Millions, except Earnings per...

Q2 2016

Conference Call August 2, 2016

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; our ability to successfully integrate acquired businesses; 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 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 goodwill and other indefinite-lived intangible assets could become impaired; our ability to obtain parts and components from suppliers on a timely basis at competitive prices; our business is global and subject to changes in exchange rates between currencies, commodity price changes, regional economic conditions and trade restrictions; our operations are subject to a number of potential risks that arise from operating a multinational business, including compliance with changing regulatory environments, the Foreign Corrupt Practices Act and other similar laws and political instability; a material disruption to one of our significant facilities; possible work stoppages and other labor matters; compliance with changing laws and regulations, particularly environmental and tax laws and regulations; litigation, product liability claims, intellectual property claims, class action lawsuits and other liabilities; our ability to comply with an injunction and related obligations imposed by the United States Securities and Exchange Commission (“SEC”); disruption or breach in our information technology systems; and other factors, 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 second quarter 2016 earnings release on the Investor Relations section of our website www.terex.com for a description and/or reconciliation of these measures.

Focus the Portfolio

Simplify the Company

Execute to Win

Terex Strategy

3

Focus the Portfolio

Taking Action:

• Announced sale of

MHPS

• Announced sale of

German Compact

Construction

business

4

Simplify the Company

Taking Action:

• Streamlined from 5 to 3

business segments

• Reducing cost structure

• Rationalizing manufacturing

footprint ‒ Cranes (Waverly)

‒ AWP (Scissors, California)

‒ MP (Linz) 5

Execute to Win

Strengthen Core

Management Processes:

• Strategy development and

deployment

• Commercial and

operational execution

• Talent management

• Drive greater accountability

and focus on execution

6

MHPS Sale Update

7

7

• MHPS sale proceeding

as planned – expect to

close in early 2017

• Accounted for as

discontinued operations

• Benefits of the deal are

not included in our

current financials

• More focused company

will drive need to

re-size corporate cost

structure

8

Financial Summary

• Sales down 10% in the

quarter

• Q2 EPS of $1.00 as

reported, $0.64 as

adjusted(1)

• Net cash provided by

operating activities of

$113.6 million, Free

cash flow(1) of $72.2

million in the quarter

• Backlog down 22% year

on year

(1) See the appendix for reconciliation to US GAAP

Results are Continuing Operations, Except Cash Figures

Q2 Operating Results

USD Millions, except Earnings per Share

9

Note: Results shown are for Continuing Operations, Except ROIC


Q2 2016 Q2 2016 Q2 2015

As Reported As Adjusted(1)

Net Sales $1,297.7 $1,297.7 $1,442.9

% Change vs 2015 (10.1%) (10.1%)

Income (loss) from Operations 73.4 106.7 136.1

Operating Margin 5.7% 8.2% 9.4%

Interest & Other Income (Expense) (30.9) (23.7) (30.4)

Effective Tax Rate (157.9%) 15.4% 28.2%

Earnings (loss) per Share $1.00 $0.64 $0.70

EBITDA(1) $90.6 $123.9 $157.0

% Net Sales 7.0% 9.5% 10.9%

ROIC(1) 23.1% 9.9%

Re-segmentation Bridge

USD Millions

10

Q2 2016 Operating Profit Bridge

AWP $72.5 AWP $72.5

Cranes (12.8) Cranes (12.8)

MP 22.7 MP 28.6

Construction 1.5 Concrete Businesses 5.9

Concrete Businesses 5.9 Corp & Other (14.9)

Other Construction Businesses (4.4) Other Construction Businesses (4.4)

MHPS (47.8) MHPS Share of Corporate Management Charge (8.5)

MHPS Share of Corporate Management Charge (8.5) Income from Operations $73.4

MHPS without Corporate Management Charge (39.3)

Corp & Other (2.0) MHPS (in Disc. Ops.) (39.3)

Income from Operations + MHPS $34.1 Income from Operations + MHPS $34.1

Previous Segment Structure Current Segment Structure

2016 Outlook - Updated

(1) Excludes the impact of future acquisitions, divestitures, restructuring and other unusual items

(2) Reflects our MHPS business being accounted for as a discontinued operation

11


Net Sales Down ~10% $4.3 - $4.5 billion

Operating Margin 5.25 - 6.25% 5.25 - 6.25%

EPS $1.30 - $1.60 $0.85 - $1.15

Interest/Other Expense ~ ($105) ~ ($100)

Tax Rate 30 - 32% ~ 27%

Depreciation/Amortization $130 - 135 $70 - 75

Free Cash Flow $200 - 250 $200 - 250

Share Count ~ 111 ~ 110

Previous StructureOriginal

Guidance(1)

with MHPS

New StructureUpdated

Guidance(1)(2)

without MHPS

2016 Segment Outlook - Updated

12

($ in Millions, except Earnings per Share)

USD Millions

(1) Reflects the re-segmentation of the concrete mixer truck and concrete paver business from our former Construction segment to MP

(approximately $140 million revenue in FY 2015) and the remaining product lines of our former Construction segment, such as mini-excavators,

loader backhoes and site dumpers, to Corporate and Other (approximately $390 million revenue in FY 2015). Our MHPS business is accounted

for as a discontinued operation. Presentation excludes the impact of future acquisitions, divestitures, restructuring and other unusual items.

Continuing Operations – New Structure

Net Sales

Operating

Profit (Loss) Net Sales

Operating

Profit (Loss)

AWP Down ~ 15% 10 - 11% Down ~ 15% 8.5 - 9.5%

Cranes Down ~ 15% 3.0 - 4.0% Down ~ 15% 1.5 - 2.5%

MP Up ~ 5% 7.5 - 8.5% ~ Flat 8.5 - 9.5%

Corp. and Other $200 -$ 250 ($50) - ($60) $200 -$ 250 ($40) - ($50)

Original Guidance(1) Updated Guidance(1)

Aerial Work Platforms

USD Millions

• NA market

decline

‒ replacement

cycle

• Pricing pressure

• Growth in

Western Europe

• New products

13


Q2 '16 Q2 '15 YTD '16 YTD '15

Net Sales 593.7$ 688.3$ 1,114.4$ 1,205.8$

% Change vs. '15 (13.7%) (7.6%)

Operating Profit, as reported 72.5 105.1 110.6 149.7

Operating Margin % 12.2% 15.3% 9.9% 12.4%

Operating Profit, as adjusted(1) 73.6 105.1 117.7 149.7


Backlog 342 441

% Change vs. '15 (22%)

$799 $614 $392 $947 $512 $383 $444 $701 $418 $409

138%

85%

66%

206%

100%57%

80%

162%

83%70%

0%

50%

100%

150%

200%

250%

$0

$200

$400

$600

$800

$1,000

Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16

Net Bookings Book-to-Bill Ratio

Cranes

• Turnaround needed in Mobile

Cranes

• NA market very weak

• Towers steady

• Production volume and mix

impacting Utilities margins

14

USD Millions


Q2 '16 Q2 '15 YTD '16 YTD '15

Net Sales 357.4$ 427.7$ 664.7$ 781.0$

% Change vs. '15 (16.4%) (14.9%)

Operating Profit, as reported (12.8) 21.3 (29.4) 23.7

Operating Margin % (3.6%) 5.0% (4.4%) 3.0%

Operating Profit, as adjusted(1) 5.5 21.3 (8.3) 23.7

Operating Margin % 1.5% 5.0% (1.2%) 3.0%

Backlog 355 514

% Change vs. '15 (31%)

$533 $462 $252 $423 $340 $400 $272 $416 $293 $279

150%

99%

67%

97%

97%

95%

74%

103%

97%82%

0%

20%

40%

60%

80%

100%

120%

140%

160%

$50

$150

$250

$350

$450

$550

$650

Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16


Materials Processing

15

• Good execution

• Crushing & Screening

market strength in

aggregates, but mining

remains weak

• Concrete products continuing to grow

• Fuchs® volume down on soft scrap market

USD Millions


Q2 '16 Q2 '15 YTD '16 YTD '15

Net Sales 256.2$ 249.6$ 480.0$ 459.9$

% Change vs. '15 2.6% 4.4%

Operating Profit, as reported 28.6 25.6 44.4 37.2


Operating Profit, as adjusted(1) 29.3 25.6 45.5 37.2


Backlog 169 153

% Change vs. '15 10%

$211 $240 $191 $231 $266 $183 $214 $244 $261 $236

99%

99%

88%

101%

130%

77%

93%

104%

119%

94%

0%

20%

40%

60%

80%

100%

120%

140%

0

40

80

120

160

200

240

280

Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16


Summary

Mixed global markets:

• Pockets of stability, but many markets

remain weak

• Caution prevails in NA rental channel

– replacement cycle

• Oil & gas and commodity softness

constraining investment

Focus, Simplify & Execute:

• Complete the pending sales of MHPS

and German Compact Construction

• Prepare AWP for the NA replacement

cycle

• Turnaround the mobile crane business

• Address global cost structure

16

16

Questions?

17

Appendix

18

Backlog Trend

Backlog shown is Continuing Operations, deliverable in less than 12 months

USD Millions

19

$ % $ %

Terex (240) (21%) (262) (22%)

Corp & Other (4) (7%) (20) (27%)

MP (18) (10%) 16 10%

Cranes (43) (11%) (159) (31%)

AWP (175) (34%) (99) (22%)

Sequential

Change

Year on Year

Change

524 421

218

704 706

441

301

570 517

342

652

636

527

512 535

514

401

407 398

355

156

150

128

130 193

153

139

149 187

169

144

113

71

60

90

74

42

52 58

54

March 2014 June 2014 September2014

December2014

March 2015 June 2015 September2015

December2015

March 2016 June 2016

AWP Cranes MP Corporate & Other

1,182

1,406

1,524

883

1,476

944

1,178

1,320

1,160

920

North America

Western Europe Asia/

Pacific

E. Europe, Middle

East & Africa

LATAM

Sales by Geography 2016 vs 2015

20

(14)%

Actual FX-Adj.

(15)% 3%

Q2

Actual FX-Adj.

Q2

Actual FX-Adj.

Q2

(22)%

Actual FX-Adj.

(23)% Q2

Actual FX-Adj.

Q2

Continuing Operations Global Sales

8% 7%

29%

11%

7%2%

51%

2016 Q2

Western Europe

Asia / Pacific

E. Eu, ME, Africa

LATAM

North America

24%

10%

8%

4%

54%

2015 Q2(47)% (47)%

(5)% (3)%

Q2 2016 Adjustments

21


Q2 2016 Q2 2016

As Reported As Adjusted

Net Sales 1,297.7$ - - - 1,297.7$

Income (loss) from Operations 73.4 5.6 27.7 - 106.7

Interest & Other Income (Expense) (30.9) 7.2 - - (23.7)

Income (Loss) from Cont. Ops. Before Taxes 42.5 12.8 27.7 - 83.0

Benefit from (Provision for) Income Taxes 67.1 (3.9) (8.3) (67.7) (12.8)

Income (Loss) from Continuing Operations 109.6$ 8.9 19.4 (67.7) 70.2$

Earnings (loss) per Share 1.00$ 0.08$ 0.18$ (0.62)$ 0.64$

Deal Related

Restructuring

& Related

Tax Valuation

Allowance

Q2 Adjusted OP by Segment

USD Millions

22

Q2 2016 Q2 2016


AWP $ 72.5 $ 1.1 $ 73.6

Cranes (12.8) 18.3 5.5

MP 28.6 0.7 29.3

Corporate & Other (14.9) 13.2 (1.7)

Continuing Operations 73.4$ 33.3$ 106.7$

Adjustments

YTD Operating Results


23

YTD 2016 YTD 2016 YTD 2015

As Reported As Adjusted(1)

Net Sales $2,412.0 $2,412.0 $2,598.7

% Change vs 2015 (7.2%) (7.2%)

Income (loss) from Operations 84.7 135.5 174.4

Operating Margin 3.5% 5.6% 6.7%

Interest & Other Income (Expense) (60.3) (45.6) (61.3)

Effective Tax Rate (259.0%) 24.8% 34.4%

Earnings (loss) per Share $0.80 $0.62 $0.68

EBITDA(1) $117.1 $167.9 $212.6

% Net Sales 4.9% 7.0% 8.2%

ROIC(1) 23.1% 9.9%

Note: Results shown are for Continuing Operations, Except ROIC

(1) See appendix for reconciliation to US GAAP

YTD 2016 Adjustments

24


YTD 2016 YTD 2016


Net Sales 2,412.0$ - - - 2,412.0$

Income (loss) from Operations 84.7 8.6 42.2 - 135.5

Interest & Other Income (Expense) (60.3) 14.7 - - (45.6)

Income (Loss) from Cont. Ops. Before Taxes 24.4 23.3 42.2 - 89.9

Benefit from (Provision for) Income Taxes 63.2 (5.5) (12.3) (67.7) (22.3)

Income (Loss) from Continuing Operations 87.6$ 17.8 29.9 (67.7) 67.6$

Earnings (loss) per Share 0.80$ 0.16$ 0.28$ (0.62)$ 0.62$

Deal Related

Restructuring

& Related

Tax Valuation

Allowance

YTD Adjusted OP by Segment

USD Millions

25

YTD 2016 YTD 2016


AWP $ 110.6 $ 7.1 $ 117.7

Cranes (29.4) 21.1 (8.3)

MP 44.4 1.1 45.5

Corporate & Other (40.9) 21.5 (19.4)

Continuing Operations 84.7$ 50.8$ 135.5$

Adjustments

Glossary

26

In an effort to provide investors with additional information regarding the Company’s results,

Terex refers to various GAAP (U.S. generally accepted accounting principles) and non-GAAP

financial measures which management believes provides useful information to investors.

These non-GAAP measures may not be comparable to similarly titled measures being

disclosed by other companies. In addition, the Company believes that non-GAAP financial

measures should be considered in addition to, and not in lieu of, GAAP financial measures.

Terex believes that this non-GAAP information is useful to understanding its operating results

and the ongoing performance of its underlying businesses. Management of Terex uses both

GAAP and non-GAAP financial measures to establish internal budgets and targets and to

evaluate the Company’s financial performance against such budgets and targets.

The amounts described below are unaudited, are reported in millions of U.S. dollars (except

per share data and percentages), and are as of or for the period ended June 30, 2016, unless

otherwise indicated.

As changes in foreign currency exchange rates have a non-operating impact on the translation

of 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.

Glossary: Free Cash Flow

USD Millions

27

Free Cash Flow is defined as the sum of net cash provided by (used in) operating activities,

the change in TFS assets, less capital expenditures. The company includes changes in TFS

assets in its definition to more closely align with how companies with captive finance

companies calculate free cash flow. We believe that the measure of free cash flow provides

management and investors further information on cash generation or use in our primary

operations.

2016 2015 2016 2015

Net cash provided by (used in) operating activities 113.6$ 25.9$ (15.6)$ (84.8)$

Increase (Decrease) in TFS Assets (25.2) 79.7 (20.5) 121.5

Increase (Decrease) in cash for securitization settlement 5.7 (6.8) 6.2 (6.8)

Capital expenditures (21.9) (22.5) (44.1) (48.7)

Free Cash Flow 72.2$ 76.3$ (74.0)$ (18.8)$

Three Months

Ended June 30,

Six Months

Ended June 30,

Glossary: Debt & Net Debt

USD Millions

28

Debt is calculated using the Condensed Consolidated Balance Sheet amounts for Notes

payable and current portion of long-term debt plus Long-term debt, less current portion

plus debt from liabilities held for sale. Net Debt is calculated as Debt less Cash and cash

equivalents, including amounts in assets held for sale. These measures aid in the

evaluation of the Company’s financial condition.

Long-term debt, less current portion $ 1,679.5 $ 1,729.8

Notes payable and current portion of long-term debt 6.8 66.4

Debt included in liabilities held for sale 22.7 13.9

Debt 1,709.0 1,810.1

Less: Cash and cash equivalents (200.8) (371.2)

Less: Cash and cash equivalents in assets held for sale (97.3) (95.3)

Net Debt $ 1,410.9 $ 1,343.6

June 30,

2016

December 31,

2015

Glossary: EBITDA

USD Millions

29

EBITDA is defined as earnings, before interest, other non-operating income (loss), income (loss) attributable to non-controlling

interest, taxes, depreciation and amortization. The Company calculates this by subtracting the following items from Net income

(loss) attributable to Terex Corporation: Net loss (income) attributable to noncontrolling interests; (Gain) loss on disposition of

discontinued operations- net of tax; and (Income) loss from discontinued operations – net of tax. Then adds the Provision for (benefit

from) income taxes; Interest & Other (Income) Expense; the Depreciation and Amortization amounts reported in the Consolidated

Statement of Cash Flows less amortization of debt issuance costs that are recorded in Interest expense. Terex believes that disclosure of EBITDA will be helpful to those reviewing its performance, as EBITDA provides information on

Terex’s ability to meet debt service, capital expenditure and working capital requirements, and is also an indicator of profitability.

Net income (loss) attributable to Terex Corporation $ 65.1 $ 84.8 $ (5.7) $ 85.8

Net loss (income) attributable to noncontrolling interest (0.5) 1.1 (0.7) 1.7

Net income (loss) 64.6 85.9 (6.4) 87.5

(Gain) loss on disposition of discontinued operations- net of tax (0.1) 0.4 (3.5) (2.7)

(Income) loss from discontinued operations – net of tax 45.1 (10.4) 97.5 (10.6)

Income (loss) from continuing operations 109.6 75.9 87.6 74.2

Provision for (benefit from) income taxes (67.1) 29.8 (63.2) 38.9

Interest & Other (Income) Expense 30.9 30.4 60.3 61.3

Income (loss) from operations 73.4 136.1 84.7 174.4

Depreciation 16.4 20.2 30.9 36.7

Amortization 2.1 2.0 4.2 4.1

Bank fee amortization not included in Income (loss) from operations (1.3) (1.3) (2.7) (2.6)

EBITDA 90.6 157.0 117.1 212.6

Operating profit adjustments 33.3 — 50.8 —

Adjusted EBITDA $ 123.9 $ 157.0 $ 167.9 $ 212.6

2015 2016 2015

Ended June 30,

Six MonthsThree Months

Ended June 30,

2016

Glossary: ROIC

30

Return on Invested Capital (“ROIC”) continues to be a metric we use to measure our

performance. ROIC and Non-GAAP Measures assist in showing how effectively we utilize capital

invested in our operations. After-tax ROIC is determined by dividing the sum of NOPAT for each

of the previous four quarters by the average of the sum of Total Terex Corporation stockholders’

equity plus Debt (as defined below) less Cash and cash equivalents for the previous five

quarters. NOPAT for each quarter is calculated by multiplying Income (loss) from continuing and

discontinued operations by a figure equal to one minus the effective tax rate of the Company.

We believe that earnings from discontinued operations, as well as the net assets that comprise

those operations’ invested capital, should be included in this calculation because it captures the

financial returns on our capital allocation decisions for the measured periods. Furthermore, we

believe returns on capital deployed in TFS do not represent our primary operations and,

therefore, TFS assets and results from operations have been excluded from the Non-GAAP

Measures. The effective tax rate is equal to the (Provision for) benefit from income taxes divided

by Income (loss) from continuing operations before income taxes for the respective quarter. Debt

is calculated using amounts for Notes payable and current portion of long-term debt plus Long-

term debt, less current portion. We calculate ROIC using the last four quarters’ adjusted NOPAT

as this represents the most recent 12-month period at any given point of determination. In order

for the denominator of the ROIC ratio to properly match the operational period reflected in the

numerator, we include the average of five quarters’ ending balance sheet amounts so that the

denominator includes the average of the opening through ending balances (on a quarterly basis)

thereby providing, over the same time period as the numerator, four quarters of average invested

capital.

Glossary: ROIC Continued

USD Millions

31

See reconciliation of adjusted amounts below on the following ROIC tables. Amounts are as of and for the three months ended for the

period referenced in the tables.

Glossary: ROIC Continued

USD Millions

32

Q2 2016 Conference Call - s22.q4cdn.com · Q2 Operating Results USD Millions, except Earnings per...

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