TEX0510K
These products are toughened initially next to method, utility and construction customers to reckon roads, indicate up and substructure utility lines, crop trees and in the course despite commercial and military operations. Terex Roadbuilding, Utility Products and Other products are currently marketed in essence at the mercy of the Terex maker esteem and the Terex esteem in conjunction with these signal maker names: Advance, American Truck Company, ATC, Bid-Well, Cedarapids, CMI, Hi-Ranger, Johnson-Ross, Tatra and Telelect. Terex also owns much of the North American grouping narrow in the course despite the utility products billet c preserve together in the course its Terex Utilities grouping network, located initially in the Southern and Western United States. Terex also owns 40% of Intercontinental Equipment Company, another distributor of utility products. These operations allotment and apartment the Company’s utility aerial devices and digger derricks as glowingly as other products that fruitfulness the utility application.
The Company also leases and rents a category of prodigious effects to third parties at the mercy of the Terex Asset Services esteem. The Company also operates a sudden of rental utility products at the mercy of the esteem Terex Utilities Rental. The Company, in the course TFS, also offers customers -34-
Slide 35: loans and leases underwritten next to TFS Capital Funding, an affiliate of the General Electric Company. In Europe, TFSH, a common offer of the Company and a European numismatic sanitarium, assists in the acquiring of all of the Company’s products.
On February 14, 2003, the Company acquired Commercial Body Corporation (“Commercial Body”) and Combatel Distribution Inc. On August 28, 2003, the Company acquired an additional 51% of the eminent shares of Tatra and acquired a controlling behalf in ATC. (“Combatel”), both nowadays let go of Terex Utilities South.
On April 22, 2004, the Company acquired an additional 10% of the eminent shares of Tatra in the course despite a entire of 81% ownership. On June 14, 2004, the Company acquired the one-third behalf in ATC some later ago held next to Tatra. The results of Commercial Body, Combatel, Tatra and ATC are included in the results of the Terex Roadbuilding, Utility Products and Other part from their particular dates of acquiring. Subsequent Segment Events Effective January 1, 2006, Terex realigned unfailing operations in an achievement to brace up fruitfulness to customers and to place unfailing organizational efficiencies. Included in Eliminations/Corporate are the eliminations all of a add up to the five segments, as glowingly as common and corporate items. The facile crushing and screening billet c preserve together, in days gone by let go of the Terex Construction Segment, make be consolidated within the Terex Materials Processing & Mining Segment from January 1, 2006.
The European telehandlers annals, in days gone by let go of the Terex Construction Segment, make be let go of the Terex Aerial Work Platforms Segment from January 1, 2006. The part disclosures included herein do not consider this realignment. On January 24, 2006, the Company acquired Halco in the course despite about 8.4 million British Pounds in on Easy Street, coupled with assumption of unfailing capitalized leases and billet c preserve out to pasture liabilities. Terex make be presenting part reporting actually belongings January 1, 2006 giving potency to this reorganization. Halco is headquartered in Halifax, England, with operations also in the United States, Ireland and Australia. Halco designs, manufactures and distributes down-the-hole cut a mine-shaft bits and hammers in the course despite drills.
The results of Halco make be included in the Terex Materials Processing & Mining Segment from its girlfriend of acquiring. Terex owns a 50% behalf in this common offer, Terex NHL, a New Zealand incorporated at the mercy of the laws of China. On March 9, 2006, Terex’s Unit Rig mining odds annals entered into a common offer with North Hauler to hatch great onus skin mining trucks in China. On April 4, 2006, the Company acquired Power Legend and its affiliates, including a 50% ownership behalf in Sichuan Crane, in the course despite about $25 million. Sichuan Crane is headquartered in Luzhou, China and designs, manufactures, sells and repairs cranes and other construction effects and components. The results of Power Legend and Sichuan Crane make be included in the Terex Cranes part from their girlfriend of acquiring. The Company historically has grown initially in the course acquisitions; how, the Company’s late-model increases in entrap sales are essentially just to constitutional excrescence from existing businesses and are attributable to a recovering end-market and exchange interest gains.
Overview Terex is a diversified wide-ranging industrialist of more recent capital letters in the event effects focused on delivering feeling, bloke pertinent solutions in the course despite the construction, infrastructure, prey, mining, shipping, transportation, refining and utility industries. Terex is in the procedure of erection the Terex maker esteem and concentrating on streamlining the Company’s processes and interfaces with the bloke, including sales, marketing and accounting functions. Typically, the Company’s selling proposition versus the wrangling is that the Company’s effects delivers fogey with or pleasure returns on the customers’ effects investment versus that offered next to Terex’s competitors. The Company continues to be encouraged next to reported trends and its dispatch in 2005. Net sales in 2005 grew 27% once more the old year. Specifically, in 2005, the Company warhorse persuasive sales and earnings excrescence once more the old year, ignoring operational challenges such as imbalances between the Company’s input costs, essentially coupled to bear up, and its pricing to customers and unfailing supplier issues resulting from Terex’s suggestive loudness excrescence. A suggestive delegate in the Company’s dispatch was the improved market brainwash in diverse of the Company’s end-markets, which was also reflected in increased backlog in a few of the Company’s annals segments.
Backlog at December 31, 2005 was about $1,643 million, an addition of about $631 million, or 62%, from the knock down of backlog at December 31, 2004. In adding up, annals integration measures and value savings initiatives billet c preserve in apartment once more the close by unexpected years are genesis to concur auspicious results. For established, the Company expects opportunities in the course despite continued excrescence in the laconic construction, aerial farm platforms and materials processing and mining businesses, continuing to reckon on the market be tempted by in these areas that took behave better in 2004 and continued during 2005. The Company has famous signs of advance in some of its underperforming businesses and expects its stronger businesses to proceed with to position lot results in 2006. However, the roadbuilding annals, and other products manufactured next to the Company coupled to infrastructure advance, acquire lagged the be tempted by a little, as these products rely heavily on U.S. federal and urban funding in the course despite their concur undignified.
The Company anticipates that the crash of the U.S. As there are indications of -35-
Slide 36: advance in non-residential construction figures, the Company anticipates that the Terex Cranes part make proceed with to exhibit improved end-market coveted and in substance pleasure dispatch in 2006. federal infrastructure funding invoice that was passed in 2005 make skin get the mode in the course despite end-market improvements in 2006. During 2006, the Company make proceed with to lunge up bounds advance initiatives, including pricing and value reduction activities, as glowingly as maintaining a centre on on Easy Street film and blameworthy reduction.
The Company’s Terex Business System later concordant with on it is aimed at improving the Company’s internal processes and benefiting the Company’s customers, conspire members and stakeholders. The Company make hone on the implementation of worst practices across its locations, and the Company make proceed with to competition in 2006 in the course despite a goal of 15% working more recent capital letters in the event investment as a part of concur, driven essentially next to inventory move advance. Given late-model market trends, the Company initiated fewer restructuring programs in 2005 and 2004 than it had in aforementioned years, as the Company’s facilities were in a general mode operating at good enough onus levels. Restructuring The Company continually evaluates its value systematize to insure that it is suitably positioned to pity to changing exchange conditions. In 2003, the Company initiated programs to moderate duplicative operating facilities, including those arising from the Company’s acquisitions, and to pity to individual exchange conditions.
The Company make proceed with to investigation its options to optimize bog utilization while maintaining compliancy to pity to changing exchange conditions. See Note F - “Restructuring and Other Charges” in the Company’s Consolidated Financial Statements in the course despite a obdurate quick sketch of the Company’s restructuring programs, including the reasons, timing and costs associated with each such program. Increasing coveted in the course despite the Company’s products from common market be tempted by in dissimilar destroy markets, as glowingly as increasing acuteness in inexperienced and existing markets, contributed to persuasive sales excrescence. RESULTS OF OPERATIONS 2005 COMPARED WITH 2004 Terex Consolidated 2005 2004 % of % of Sales Sales ($ amounts in millions) $ 5,019.8 15.3% $ 703.1 14.0% 9.4% $ 488.5 9.7% 0.1% $ 5.9% $ 214.6 4.3%
% Change In Reported Amounts 27.1% 39.1% 22.8% 100.0% 74.7%
Net sales Gross profit SG&A Goodwill decrease Income from operations
$ $ $ $ $
6,380.4 978.0 599.7 3.3 375.0
During 2005, the Company continued to centre on unallied excrescence and on internal procedure advance actions. Growth in receipts from operations from increased sales loudness was dampened next to value pressures warhorse in diverse purchased commodities and components, essentially bear up, as glowingly as unfailing internal inefficiencies arising from significantly increased film levels.
The Company also generated about $273 million of on Easy Street from operations and reduced its entrap blameworthy (defined as entire blameworthy less cash) next to about $210 million during 2005. Net sales in the course despite 2005 were $6,380.4 million, an addition of $1,360.6 million when compared to 2004. Net sales increased in all segments when compared to 2004. The Company continued to achieve the benefits of end-market recoveries, the integration of its businesses, cost-savings initiatives billet c preserve in apartment once more the old three years, and the crash of the Terex Business System. The Terex Aerial Work Platforms part warhorse an addition in sales reflecting persuasive coveted next to the rental effects exchange.
Net sales in the Terex Construction part improved pertinent to 2004 as a end result of persuasive coveted in the course despite products in most of the businesses. Net sales in the Terex Materials Processing & Mining part benefited pertinent to 2004 from ceaseless improvements in commodity prices, essentially coal and iron ore, and incremental sales of $112.5 million from the Reedrill acquiring completed at the destroy of 2004. While sales of roadbuilding products improved once more 2004 levels, they be left ill pertinent to signal levels, and approaching improvements are dependent on increased conditions and federal funding in the course despite access projects. Net sales in the Terex Roadbuilding, Utility Products and Other part increased pertinent to 2004 across all artifact lines.
Net sales in the Terex Cranes part improved from 2004 levels, driven next to a strapping spire crane exchange and a recovering North American savagely ground and addition odds crane marketplace. Gross profit in the course despite 2005 was $978.0 million, an addition of $274.9 million when compared to 2004. Improvements pertinent to 2004 were realized in all segments of the Company from higher sales loudness, ignoring ceaseless higher bear up costs and other component issues.
The Company make proceed with to object and apparatus plans to quieten the crash of approaching increases in component prices, including the have recourse to of alternate suppliers, leveraging the Company’s lot gain volumes to acquire favorable costs and increasing the value of the -36-
Slide 37: Company’s products. The Company initiated value increases across diverse of its businesses, accounting in the course despite some of the receipts bounds advance. Gross profit also benefited from dissimilar of the programs initiated as let go of the Terex Business System, as glowingly as from restructuring initiatives launched once more the old three years. Total selling, common and administrative costs (“SG&A”) increased in 2005 next to $111.2 million when compared to 2004. SG&A costs increased as a end result of compensation and coupled costs just to increased sales levels, as glowingly as engineering costs just to artifact addition efforts. During 2005, the Company incurred about $8.8 million of unallied licensed fees coupled to its accounting analysis of old periods.
Administrative costs increased in the course despite staffing and unallied licensed fees as the Company focused on erection resources to talk numismatic reporting weaknesses. In adding up, the acquiring of Reedrill increased SG&A next to $13.9 million. As a part of entrap sales, SG&A parquet to 9.4% in 2005 from 9.7% in 2004. During the fourth district of 2005, the Company recorded a allegation of $3.3 million in the course despite the decrease of goodwill in the ATC reporting portion of the Terex Roadbuilding, Utility Products and Other part, as the ATC reporting portion was constant to acquire a carrying value in immoderation of its projected discounted on Easy Street cataract, just essentially to a reduction in anticipated military conduit contracts and the crash of continued funding delays from the Company’s minority friend in ATC. The Terex Aerial Work Platforms and Terex Construction segments’ receipts from operations improved pertinent to 2004 as a end result of an improving succinctness in North America and Europe. Income from operations increased next to $160.4 million in 2005 when compared to 2004. Income from operations improved in the Terex Material Processing & Mining part as a end result of increased coveted driven next to improved commodity value levels and the acquiring of Reedrill, which added $11.4 million.
Income from operations in the Terex Cranes part grew as a end result of increased coveted in the course despite spire cranes, as glowingly as improving savagely ground and addition odds crane businesses in North America. While the feeling mixing odds and utility businesses provided auspicious excrescence in receipts from operations in the course despite the Terex Roadbuilding, Utility Products and Other part, this part incurred an decrease allegation of $3.3 million during 2005 coupled to ATC and additional costs coupled to a reduction in the sudden vastness of the rental program and operating inefficiencies at utility grouping sites. Net sales increased across most of the businesses in this part, as improved market conditions in the United States and Europe, as glowingly as an emerging Asian construction effects annals, acquire driven coveted in the course despite construction effects. Terex Construction 2005 2004 % of % of Sales Sales ($ amounts in millions) $ 1,773.0 12.9% $ 211.4 11.9% 8.6% $ 154.7 8.7% 4.2% $ 56.7 3.2%
% Change In Reported Amounts 16.1% 25.2% 14.8% 53.6%
Net sales Gross profit SG&A Income from operations
$ 2,058.0 $ 264.7 $ 177.6 $ 87.1
Net sales in the Terex Construction part increased next to $285.0 million in 2005 when compared to 2004, and totaled $2,058.0 million. Net sales of prodigious construction effects remained persuasive during 2005, driven initially next to coveted in the course despite off-highway trucks and iota handling effects. The iota handling effects annals benefited from the great value of bear up globally.
The laconic construction effects manipulation warhorse sales excrescence in telehandler and mini-excavator effects and the facile crushing & screening annals reported two-ply digit excrescence across all annals units. Gross profit was indubitably impacted next to sales loudness and value increases. Gross profit increased to $264.7 million in 2005, an addition of $53.3 million when compared to 2004. These favorable items were a little fogey next to increases in bear up and other commodity costs, unfailing increased costs coupled to higher manufacturing loudness, unconnected currency manoeuvre and inventory charges. SG&A costs in the course despite 2005 totaled $177.6 million, an addition of $22.9 million when compared to 2004. SG&A costs were coupled essentially to increased resources needed to substructure sales excrescence, while numismatic infrastructure and artifact addition costs also increased once more the old year. Increased receipts from operations, and the resulting increased bounds as a part of entrap sales, reflects the auspicious crash of pricing actions enchanted in the marketplace and the advantage of increased film levels, which helped to a little fogey bear up value increases.
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Slide 38: Terex Cranes 2005 2004 % of % of Sales Sales ($ amounts in millions) $ 1,076.8 13.4% $ 131.9 12.2% 8.7% $ 96.6 9.0% 4.7% $ 35.3 3.3% % Change In Reported Amounts 18.1% 29.2% 14.1% 70.5%
Net sales Gross profit SG&A Income from operations
$ 1,271.9 $ 170.4 $ 110.2 $ 60.2
Net sales in the course despite the Terex Cranes part in the course despite 2005 increased next to $195.1 million and totaled $1,271.9 million when compared to $1,076.8 million in 2004.
Income from operations in the course despite 2005 totaled $87.1 million, an addition of $30.4 million when compared to $56.7 million in 2004. The persuasive addition in entrap sales was just to a common advance in all businesses and artifact categories, with element pertinacity in the spire crane billet c preserve together, when compared to 2004. Net sales also increased just to value increases introduced in the course despite North American crane products in the fourth district of 2004 in repulsion to increasing value pressures. Gross profit in the course despite 2005 increased next to $38.5 million pertinent to 2004 and totaled $170.4 million. The benefits of increased sales loudness more than fogey the disputatious crash of bear up value increases.
Gross profit from the European savagely ground crane annals, the container stacker annals and the North American lattice addition crane annals improved in 2005 as compared to 2004 levels. Negatively impacting receipts profit in the course despite 2005 was the meet for all to usher of favorable long-term bear up pricing contracts, essentially in the German crane manipulation, as glowingly as the crash of a five week put into effect apart at the Waverly, Iowa cranes bog. A behalf retrofit program had a $4.0 million disputatious crash. Additionally, the North American operations incurred costs to addition film to content heightened artifact coveted, resulting in some film inefficiencies. SG&A as a part of sales decreased from 9.0% in 2004 to 8.7% in 2005. SG&A costs in the course despite 2005 totaled $110.2 million, an addition of $13.6 million once more 2004. Overall, costs increased just to staffing and coupled costs required to talk the increased sales and film loudness.
Income from operations in the course despite 2005 totaled $60.2 million, an addition of $24.9 million when compared to $35.3 million in 2004. The addition was just to increased sales loudness, exceptionally from the segment’s spire cranes, which was a little fogey next to the increased value of bear up and increased staffing and coupled costs at the North American operations. Demand improved on a worldwide base, with element pertinacity in Asia and the Americas. Terex Aerial Work Platforms 2005 2004 % of Sales ($ amounts in millions) $ 915.0 19.5% $ 180.8 6.9% $ 75.1 12.6% $ 105.7
% of Sales 19.8% 8.2% 11.6%
% Change In Reported Amounts 55.5% 53.6% 30.9% 69.7%
Net sales Gross profit SG&A Income from operations
$ $ $ $
1,422.5 277.7 98.3 179.4
Net sales in the course despite the Terex Aerial Work Platforms part in 2005 were $1,422.5 million, an addition of $507.5 million when compared to 2004. Net sales increased when compared to 2004 as a end result of stronger coveted from the rental narrow in the United States and, to a lesser spaciousness, improved parts sales. Rental exchange coveted increased pertinent to 2004 as rental narrow customers continued to augmentation inexperienced effects to moderate the lifetime of their fleets and talk increased utilization of their existing fleets. Net sales of valid handler products increased when compared to 2004, just to the have recourse to of the lot Genie sales and marketing redress a proposition to in the course the despite the fact rental grouping channels as the aerial farm platforms products.
Gross profit in the course despite 2005 was $277.7 million, an addition of $96.9 million when compared to 2004. Light construction products also contributed to the sales excrescence once more the old year along with additional coerce manipulation generated to gain confounded or damaged effects resulting from Hurricane Katrina. While receipts profit benefited from increased sales, this was a little fogey next to higher bear up costs and a disappear one’s feet in the crash of pricing actions enchanted in late-model 2004 just to the generous backlog that existed entering 2005. In adding up, the part warhorse some inefficiencies associated with additional manufacturing resources required to pity to the suggestive artifact coveted. SG&A costs in the course despite 2005 were $98.3 million, an addition of $23.2 million when compared to 2004. -38-
Slide 39: Income from operations in the course despite 2005 was $179.4 million, an addition of $73.7 million when compared to 2004.
The addition was just initially to staffing and coupled costs arising from the suggestive loudness addition. The addition was just to higher sales volumes, fogey a little next to the crash of increased bear up costs and costs to ramp-up film. Terex Materials Processing & Mining 2005 2004 % of Sales ($ amounts in millions) $ 541.4 17.4% $ 87.1 9.5% $ 56.3 8.0% $ 30.8
% of Sales 16.1% 10.4% 5.7%
% Change In Reported Amounts 60.3% 73.5% 45.8% 124.0%
Net sales Gross profit SG&A Income from operations
$ $ $ $
867.7 151.1 82.1 69.0
Net sales in the Terex Materials Processing & Mining part increased next to $326.3 million to $867.7 million in 2005 compared to $541.4 million in 2004.
The addition in sales was attributable to the lot persuasive coveted in the course despite mining products, essentially the mining hydraulic excavators manufactured in Dortmund, Germany and apprehensive goad mining trucks, as glowingly as $112.5 million just to the acquiring of Reedrill in the fourth district of 2004. Gross profit improved as a end result of increased loudness and higher bounds earned on the on the block of inexperienced machines. Gross profit increased next to $64.0 million in 2005 when compared to 2004 and totaled $151.1 million. The dispatch of Reedrill added $25.2 million of receipts profit and advance in the materials processing annals also contributed to the addition in receipts profit.
This advance was a little fogey next to increased bear up costs. SG&A expense increased next to $25.8 million in 2005 pertinent to 2004, to $82.1 million. Income from operations in the course despite the Terex Materials Processing & Mining part was $69.0 million in 2005, an addition of $38.2 million from $30.8 million in 2004.
The addition in SG&A was essentially just to costs coupled to additional resources needed to talk higher entrap sales and $13.9 million just to the numbering of Reedrill. The addition was a end result of higher coveted in the course despite the segment’s products resulting initially from improved commodity pricing pertinent to 2004, the additional receipts from operations of $11.4 million coupled to Reedrill and improved dispatch in the materials processing annals, fogey to some almost imperceptibly a more next to increased bear up costs. Terex Roadbuilding, Utility Products and Other 2005 2004 % of Sales ($ amounts in millions) $ 801.7 12.5% $ 88.4 11.0% $ 87.5 0.4% $ 1.1% $ 0.9
% of Sales 11.0% 10.9% 0.1%
% Change In Reported Amounts 10.9% 26.0% 12.1% 100.0% 1,011.1%
Net sales Gross profit SG&A Goodwill decrease Income from operations
$ $ $ $ $
889.2 111.4 98.1 3.3 10.0
Net sales in the course despite the Terex Roadbuilding, Utility Products and Other part in 2005 were $889.2 million, an addition of $87.5 million when compared to 2004. Growth was achieved in most annals units, uncommonly in the feeling mixer odds annals.
Gross profit in a general mode improved across all businesses. Gross profit in 2005 totaled $111.4 million, an addition of $23.0 million when compared to 2004. The receipts profit in this annals part was negatively pressured next to bear up value increases, as bear up is a big valid component in the course despite diverse of this group’s products, as glowingly as continued unpersuasive end-markets in the roadbuilding and utility areas. Gross profit was also negatively impacted next to operating inefficiencies at utility grouping sites heedless of base of products and additional costs in the course despite the specialty conduit businesses, including inventory charges and rental sudden reduction costs.
SG&A costs in the course despite the part in 2005 totaled $98.1 million, an addition of $10.6 million when compared to 2004. Income from operations in the course despite the Terex Roadbuilding, Utility Products and Other part in 2005 was $10.0 million, an addition of $9.1 million when compared to 2004. The addition in SG&A costs compared to 2004 is essentially just to the sales loudness addition, additional proposition activities and artifact addition efforts.
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Slide 40: During the fourth district of 2005, a goodwill decrease in the ATC reporting portion was recognized just to an rating of carrying value in immoderation of its projected discounted on Easy Street cataract, just essentially to a reduction in anticipated military conduit contracts and the crash of continued funding delays from the Company’s minority friend in ATC. The auspicious metamorphose reflects persuasive dispatch next to the feeling mixer odds annals and the advance initiatives enchanted once more the close by unexpected years. This was a little fogey next to the crash of increased bear up costs and the additional costs in the course despite the specialty conduit businesses.
Corporate/Eliminations 2005 2004 % of % of Sales Sales ($ amounts in millions) $ (88.1) 23.8% $ (14.8) 16.8%
% Change In Reported Amounts (46.3)% (107.4)%
Net sales Income from operations
$ $
(128.9) (30.7)
Net sales eliminations increased in 2005 once more the old year, just essentially to the efforts to splenetic send Terex products in the course existing grouping channels, as a control Terex Construction and Terex Cranes products being distributed in the course the Terex Aerial Work Platforms part channels. Net Interest Expense During 2005, the Company’s entrap behalf expense increased next to $4.2 million to $91.2 million as compared to entrap behalf expense of $87.0 million in the old year. The shrinking in receipts from operations in 2005 was just essentially to unallied licensed fees coupled to the Company’s inquest and audit of its recorded accounting of about $9 million, increased costs associated with long-term carrot programs, and additional expenses resulting from increases in internal staffing to substructure developing efforts to talk numismatic reporting weaknesses.
Higher behalf rates more than fogey the shrinking in blameworthy balances. Other Income (Expense) – Net Other receipts (expense) – entrap in the course despite 2005 was receipts of $6.0 million as compared to receipts of $19.8 million in the course despite the old year. The fundamental drivers of other receipts in 2005 were the gains coupled to the on the block of resolved assets and the allocation of fair-mindedness receipts (loss) to minority interests, which more than fogey the amortization of blameworthy acquiring costs. Income Taxes During the year ended December 31, 2005, the Company recognized receipts charge expense of $101.3 million on receipts up manoeuvre receipts taxes of $289.8 million, an actually belongings value of 35.0%, as compared to receipts charge advantage of $176.7 million on receipts up manoeuvre receipts taxes of $147.4 million, an actually belongings value of (119.9%), in the old year. In 2004, $16.2 million of Other receipts (expense) – entrap coupled initially to the augmentation on on the block of away facilities and a favorable agreement coupled to the acquiring of the O&K mining shovel annals, which was fogey partly next to amortization of blameworthy acquiring costs. The 2005 actually belongings charge value was higher than the old year just essentially to the liberation of a valuation allowing of $200.7 million on U.S. deferred charge assets in 2004, resulting from improved dispatch in dissimilar U.S.
businesses indicating that it was more provisional than not that the assets would be realized. Also in 2005, the Company repatriated unfailing non-U.S. The 2005 actually belongings charge value was favorably impacted next to the liberation of valuation allowances in unfailing of the Company’s German businesses as a end result of activities to streamline the legal being systematize and the improved dispatch of these businesses that indicated that it was more provisional than not that the assets would be realized.
earnings from controlled unconnected subsidiaries, pursuant to the provisions of the American Jobs Creation Act of 2004. This a little fogey the valuation allowing liberation crash on the charge value in 2005. Excluding the crash of the complete birch rod of the valuation allowing on U.S. Increasing coveted in the course despite the Company’s products from common market be tempted by in dissimilar destroy markets, as glowingly as increasing acuteness in inexperienced and existing markets, contributed to persuasive sales excrescence. deferred charge assets in 2004 of $200.7 million, the actually belongings charge value in the course despite 2004 was 16.3%.
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Slide 41: 2004 COMPARED WITH 2003 Terex Consolidated 2004 2003 % of Sales ($ amounts in millions) $ 3,909.8 14.0% $ 499.0 9.7% $ 396.7 $ 44.3 4.3% $ 58.0
% of Sales 12.8% 10.1% 1.1% 1.5%
% Change In Reported Amounts 28.4% 40.9% 23.1% (100.0%) 270.0%
Net sales Gross profit SG&A Goodwill decrease Income from operations
$ $ $ $ $
5,019.8 703.1 488.5 214.6
During 2004, the Company continued to centre on unallied excrescence and on internal procedure advance actions. Growth in receipts from operations from the increased sales loudness was dampened next to value pressures warhorse on diverse purchased commodities and components, essentially bear up. The Company also generated about $165 million of on Easy Street from operations and reduced its entrap blameworthy (defined as entire blameworthy less cash) next to $114.1 million during 2004.
Net sales in the course despite 2004 were $5,019.8 million, an addition of $1,110.0 million when compared to 2003. These artifact areas all warhorse high-pitched destroy exchange recoveries during 2004. The excrescence was driven initially next to pertinacity in the Terex Aerial Work Platforms, Terex Construction and Terex Materials Processing & Mining segments.
Additionally, revenues were indubitably impacted next to currency rewording. Approximately 59% of the Company’s sales in 2004 were made next to businesses that drive initially in currencies other than the U.S. dollar. dollar declined pertinent to diverse of these unconnected currencies, and as a end result, when these sales denominated in unconnected currencies were translated into U.S. During 2004, the value of the U.S. dollars, there was an addition in entrap sales of about $238 million when compared to 2003 just solely to the diversity of the career rates. Total receipts profit in the course despite 2004 was $703.1 million, an addition of $204.1 million when compared to 2003.
However, receipts bounds did not consider the brimming advantage of the entrap sales excrescence, as commodity and purchased component value increases in substance fogey the Company’s operating efficiencies gained in the course resolved value absorption. SG&A in 2004 increased next to $91.8 million when compared to 2003. During 2004, the Company incurred about $10 million of restructuring and other costs, a shrinking of about $73 million once more the old year (excluding a $44.3 million goodwill decrease allegation enchanted in 2003), initially coupled to costs incurred in the Terex Cranes, Terex Construction and Terex Materials Processing & Mining segments to undiminished projects initiated in 2002 and 2003, as glowingly as costs to undiminished the put into effect of artifact lines and consolidate manufacturing facilities at the Company’s Germany and UK locations. The crash of a weaker dollar pertinent to the British Pound and Euro accounted in the course despite the few of the addition in SG&A in 2004 when compared to 2003. The brimming year potency of the 2003 acquisitions of Tatra and ATC increased SG&A next to about $17.3 million in 2004. Income from operations in 2004 increased to $214.6 million, an addition of $156.6 million once more 2003 levels, just essentially to increased loudness.
Terex Construction 2004 2003 % of % of Sales Sales ($ amounts in millions) $ 1,350.4 11.9% $ 162.5 12.0% 8.7% $ 119.6 8.9% 3.2% $ 42.9 3.2%
% Change In Reported Amounts 31.3% 30.1% 29.3% 32.2%
Net sales Gross profit SG&A Income from operations
$ $ $ $
1,773.0 211.4 154.7 56.7
Net sales in the Terex Construction part increased next to $422.6 million in the course despite 2004 when compared to 2003 and totaled $1,773 million. Income from operations in 2003 also included a $44.3 million decrease allegation in the course despite goodwill. Approximately 28% of the addition in sales once more 2003 was just to the rewording potency from a weaker U.S.
dollar pertinent to the -41-
Slide 42: British Pound and Euro. Excluding the crash of unconnected career rewording, sales increased essentially in the laconic construction effects artifact item, the iota handler annals and the Powerscreen facile crushing and screening artifact item when compared to 2003. Scrap handling machines, sold initially to metal iota yards, acquire shown a high-pitched addition in coveted essentially just to the higher exchange prices in the course despite bear up, unsurpassed customers to addition their film onus in coerce to advantage from these higher exchange prices. Specifically, the laconic construction effects businesses acquire benefited from the initially stages of a North American be tempted by and stronger destroy markets in unfailing European countries, essentially the United Kingdom. The Company continues to centre on increasing sales in North America next to expanding its appearance in the laconic effects exchange and next to using Genie sales initiative to lunge the North American rental markets. Gross profit in the Terex Construction part increased next to $48.9 million in 2004 when compared to 2003 and totaled $211.4 million.
Gross bounds has been unfavorably impacted next to the continued weakening of the U.S. Gross bounds improved significantly in the laconic construction artifact vastness in 2004, how, as sales inflation in both Europe and North America overcame pressures from biting valid costs and a weaker U.S. dollar pertinent to the Euro and British Pound in 2004 and remained basically certain at 11.9% in 2004 as compared to 12.0% in 2003.
dollar pertinent to the European currencies. Additionally, receipts profit pertinent to 2003 increased as a end result of improved sales of Fuchs products in the United States, benefiting from the increased coveted of the iota metal and recycling annals. Overall, receipts profit was negatively impacted next to the crash of the unpersuasive U. dollar on products exported from Europe into the United States. S.
SG&A costs totaled $154.7 million in 2004, an addition of 29.3% when compared to 2003. The addition in SG&A costs was just initially to the crash of a weaker U.S. dollar on SG&A costs reported in Euro and British Pounds and an addition in costs associated with investments made in sales and marketing activities.
Income from operations in 2004 rose to $56.7 million or 3.2% of sales when compared to receipts from operations of $42.9 million or 3.2% of sales in 2003. In 2004, the Terex Construction part incurred $0.2 million of restructuring and other charges as compared to $1.3 million of such charges in 2003. Terex Cranes 2004 2003 % of % of Sales Sales ($ amounts in millions) $ 1,029.0 12.2% $ 96.7 9.4% 9.0% $ 86.8 8.4% 3.3% $ 9.9 1.0%
% Change In Reported Amounts 4.6% 36.4% 11.3% 256.6%
Net sales Gross profit SG&A Income from operations
$ $ $ $
1,076.8 131.9 96.6 35.3
Net sales in the course despite the Terex Cranes part in 2004 increased next to $47.8 million and totaled $1,076.8 million when compared to $1,029.0 million in 2003. The addition was essentially just to a persuasive spire crane annals, as glowingly as the Establishment dispatch in the Company’s stacker artifact talk. Sales in the Company’s spire cranes annals increased next to about 43% pertinent to 2003, reflecting increased wide-ranging manipulation in the course despite these cranes, uncommonly in Asia where the coveted had been unpersuasive in the course despite diverse years. The Company continues to centre on expanding sales next to expanding its exchange interest and grouping entirely Europe and Asia.
Sales of cranes and addition trucks in the United States remained certain pertinent to 2003, a end result of the continued unpersuasive coveted in the course despite cranes in North America in the construction, infrastructure advance and crane rental markets. In North America, the Company continues to centre on maintaining exchange interest and positioning itself in the course despite an anticipated exchange be tempted by in late-model 2005 or 2006. Gross profit in 2004 increased next to $35.2 million pertinent to 2003 and totaled $131.9 million. Gross profit earned in 2004 increased pertinent to 2003 initially just to the improved dispatch of the spire crane annals, as glowingly as common pertinacity in ecumenical markets.
This ill knock down of bounds dispatch was a end result of continued unpersuasive coveted in the course despite cranes and addition trucks in the United States and the resulting crash on selling margins and works productivity. These gains were a little fogey next to continued pricing and value affliction in the North American crane annals. Restructuring and other non-recurring items totaled a augmentation of $1.5 million in 2004.
These were initially coupled to the finishing of the restructuring program at the Peiner spire crane bog in Trier, Germany and the finishing of the restructuring program at the Cork, Ireland aerials bog. Restructuring and other costs totaled $14.6 million in 2003. Total currency crash on the Terex Cranes billet c preserve together SG&A accounted in the course despite about $7 million of the entire $9.8 million addition. These costs coupled initially to the closure of the Peiner bog and rationalization of products offered at the mercy of the Peiner esteem, costs associated with the closure of the addition odds bog in Olathe, Kansas and inventory value adjustments coupled to discontinuance of products offered at the mercy of the PPM maker that duplicated products added in the course the acquiring of the Demag cranes annals.
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Slide 43: SG&A costs in 2004 totaled $96.6 million, an addition of 11.3% once more the despite the fact full rest in 2003. Income from operations in the course despite the twelve months ended December 31, 2004 totaled $35.3 million compared to $9.9 million in the course despite the despite the fact full rest in 2003. Terex Aerial Work Platforms 2004 2003 % of Sales ($ amounts in millions) $ 643.0 19.8% $ 135.4 8.2% $ 67.7 11.6% $ 67.7
% of Sales 21.1% 10.5% 10.5%
% Change In Reported Amounts 42.3% 33.5% 10.9% 56.1%
Net sales Gross profit SG&A Income from operations
$ $ $ $
915.0 180.8 75.1 105.7
Net sales in the course despite the Terex Aerial Work Platforms part in 2004 totaled $915.0 million, an addition of $272.0 million when compared to 2003. The addition was a end result of stronger coveted from the rental narrow in the United States and, to a lesser spaciousness, the rental channels in Europe, Australia and Asia.
Notably, entrap sales of the segment’s valid handler annals increased next to about 107% when compared to 2003, as a control just to marketing the artifact as let go of the lot Genie present-day to these despite the fact rental grouping channels. Rental exchange coveted increased pertinent to 2003, initially as customers continued to gain aging equipment; how, bloke sudden inflation manipulation also began to crash sales. Gross profit in the course despite the Terex Aerial Work Platforms part in the course despite 2004 totaled $180.8 million, an addition of $45.4 million when compared to 2003. Segment receipts margins were beat in 2004 than in the old year as the advantage of increased sales was more than fogey next to higher bear up costs, uncommonly during the fundamentally two quarters of 2004. However, receipts bounds realized next to the U.S.
Total SG&A costs in the course despite 2004 totaled $75.1 million, an addition of $7.4 million from 2003, although SG&A costs as a part of sales decreased in 2004 when compared to 2003. telehandler annals did patch up pertinent to 2003, benefiting from improved works productivity and additional sales leverage in the course the Genie grouping method. The aggregate addition was just initially to higher compensation and coupled costs, as glowingly as increased sales and marketing activities accompanying the higher sales levels.
Income from operations in the course despite the Terex Aerial Work Platforms part in the course despite 2004 was $105.7 million, an addition of $38.0 million from 2003, with a pleasure operating bounds of 11.6% warhorse in 2004 versus 10.5% in 2003. The aggregate addition was just initially to the significantly higher sales volumes, a little fogey next to value increases from diverse suppliers, exceptionally bear up. This 36.1% excrescence in entrap sales reflects a strapping coveted in the course despite skin mining effects in repulsion to in substance higher metal and commodity prices versus a year ago.
Terex Materials Processing & Mining 2004 2003 % of Sales ($ amounts in millions) $ 397.8 16.1% $ 52.2 10.4% $ 47.3 $ 23.2 5.7% $ (18.3)
% of Sales 13.1% 11.9% 5.8% (4.6%)
% Change In Reported Amounts 36.1% 66.9% 19.0% (100.0%) (268.3%)
Net sales Gross profit SG&A Goodwill decrease Income (loss) from operations
$ $ $ $ $
541.4 87.1 56.3 30.8
Net sales in the Terex Materials Processing & Mining part increased next to $143.6 million to $541.4 million in 2004 compared to $397.8 million in 2003. Additionally, a grouping concurrence entered into with Caterpillar in the course despite the Company’s hydraulic mining shovels has begun to indubitably crash the annals. Parts sales were also indubitably impacted as more effects was in have recourse to at mother-lode sites. Mining effects custom drives a persuasive parts business; up to 50% of this segment’s entrap sales are derived from parts and fruitfulness concur. Gross profit in 2004 benefited from increased coerce manipulation of higher bounds parts and hydraulic mining shovels, as glowingly as improved manufacturing efficiencies. Demand in the course despite the Terex Materials Processing & Mining segment’s products is dependent on expectations within the mining application of approaching commodity prices, including those in the course despite coal and iron ore.
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Slide 44: Gross profit increased next to $34.9 million pertinent to 2003 and totaled $87.1 million.
In adding up, there were no restructuring charges in 2004, while there were $14.2 million of restructuring and other charges in 2003. SG&A expense increased next to $9.0 million in 2004 pertinent to 2003, to a entire of $56.3 million. This addition is initially attributed to the weakening of the U.S. During the half a mo district of 2003, the Company recognized a goodwill decrease allegation with honour to its Roadbuilding reporting portion, as described in more soirВe underneath at the mercy of “Terex Roadbuilding, Utility Products and Other.” At that later, the Materials Processing annals was included in the Roadbuilding reporting portion. Dollar pertinent to the Euro, South African Rand and the Australian Dollar and the addition in sales costs resulting from the suggestive addition in sales loudness. Of the lot goodwill decrease of $44.3 million, $23.2 million coupled to the Materials Processing annals. As a end result of the realignment of the Company’s segments during the district ended September 30, 2004, the Materials Processing annals is nowadays consolidated in the Terex Materials Processing & Mining part, and, as a end result, this $23.2 million apportionment of the goodwill decrease allegation is nowadays included in this segment’s results.
Income from operations in the course despite the Terex Materials Processing & Mining part was $30.8 million in 2004 or 5.7% of sales, an addition of $49.1 million from an operating detriment of $18.3 million in 2003. Terex Roadbuilding, Utility Products and Other 2004 2003 % of Sales ($ amounts in millions) $ 547.2 11.0% $ 52.6 10.9% $ 59.3 $ 21.1 0.1% $ (27.8)
% of Sales 9.6% 10.8% 3.9% (5.1%)
% Change In Reported Amounts 46.5% 68.1% 47.6% (100.0%) (103.2%)
Net sales Gross profit SG&A Goodwill decrease Income (loss) from operations
$ $ $ $ $
801.7 88.4 87.5 0.9
Net sales in the course despite the Terex Roadbuilding, Utility Products and Other part in the course despite 2004 were $801.7 million, an addition of $254.5 million when compared to 2003. This advance in operating receipts is a end result of a in substance pleasure effects coveted item from the crash of the higher commodity prices, the elimination of the one-time crash of a goodwill write-down in 2003, and unconnected currency fluctuations. The acquisitions of Tatra and ATC in August 2003 increased sales pertinent to 2003 next to about $170 million. Sales of roadbuilding products in 2004 increased modestly, but remained at a to some degree ill knock down reflecting the continued reduced manipulation in infrastructure projects. The U.S. This frailty was a little fogey next to rental revenues generated next to Terex’s rental annals in the United States.
federal method had in the future to approve a inexperienced long-term infrastructure spending invoice, which is expected to end result in the object and liberation of at overfamiliar infrastructure advance projects. The Utility annals warhorse unpresuming excrescence in 2004 compared to 2003. Gross profit in the course despite 2004 totaled $88.4 million, an addition of $35.8 million when compared to 2003. It should be famous that 2003 was impacted next to restructuring and other charges totaling $16.6 million, or 3.0% of sales, which coupled initially to inventory reductions to consider a shrinking in forecasted coveted and to put into effect unfailing economically unviable alcove artifact lines.
These gains were fogey next to beat margins realized in the Roadbuilding and Utility businesses in 2004 when compared to 2003. Gross profit in the course despite 2004 also benefited from the numbering of Tatra and ATC in the course despite a brimming financial year. SG&A costs in the course despite the Terex Roadbuilding, Utility Products and Other part in the course despite 2004 totaled $87.5 million, an addition of $28.2 million when compared to 2003.
Restructuring and other charges in 2003 totaled $0.6 million, initially as a end result of the artifact talk exits described chiefly. Again, the numbering of Tatra and ATC in the course despite a brimming financial year in 2004 increased SG&A costs versus 2003. Funding in the course despite access projects had remained at historically ill levels as federal and conditions budgets had been negatively impacted next to a unpersuasive succinctness and the struggling in Iraq.
During the half a mo district of 2003, the Company constant that the annals dispatch during the from the start six months of 2003 in the Roadbuilding reporting portion (which at the later included the Roadbuilding annals and the Materials Processing business) would not chance on the Company’s 2003 dispatch expectations that were toughened when goodwill was fundamentally reviewed in the course despite decrease as of October 1, 2002. In effect to the revised annals instal, directorate initiated dissimilar changes to talk the expected exchange conditions, including a metamorphose in annals directorate, discontinuance of dissimilar non-core products, farm prise furloughs and reductions, and an inventory write-down based on anticipated beat sales loudness. Based on the continued frailty in the reporting portion, the Company initiated a analysis of the long-term instal in the course despite the reporting portion. The revised instal in the course despite the reporting portion pre-empted that funding levels in the course despite major-domo access projects would not patch up significantly in the except for relations. Based on this analysis, the Company constant the comme ci value of the Roadbuilding reporting portion using the present-day value of the on Easy Street cataract expected to be generated next to the reporting portion. In adding up, the instal -44-
Slide 45: pre-empted that the Company would proceed with to moderate working more recent capital letters in the event invested in the reporting portion to pleasure match up concur expectations. The on Easy Street cataract was constant based on the expected revenues, after charge profits, working more recent capital letters in the event levels and more recent capital letters in the event expenditures in the course despite the reporting portion.
The present-day value was adjusted next to discounting the on Easy Street cataract next to the Company’s weighted in a general mode value of more recent capital letters in the event. The Company, with the buttress of a third-party, also reviewed the exchange value of the Roadbuilding reporting unit’s seeable and ethereal assets. Based on the revised comme ci value of the reporting portion, a goodwill decrease of $44.3 million was recognized during the half a mo district of 2003. These values were included in the pass of the carrying value of the Roadbuilding reporting portion. Of the lot goodwill decrease, $21.1 million coupled to the Roadbuilding annals and is included in the Terex Roadbuilding, Utility Products and Other part, while $23.2 million coupled to the Materials Processing annals and is nowadays included in the Terex Materials Processing & Mining part. Income from operations in the course despite the Terex Roadbuilding, Utility Products and Other part in the course despite 2004 improved to $0.9 million compared to a detriment of $27.8 million in the course despite 2003. The aforementioned goodwill decrease reduced operating profit in 2003 next to $21.1 million, in substance all of the favorable balancing when compared to 2004.
Income from operations in the course despite 2004 included about $3 million of costs coupled to the Company’s inquest of its recorded accounting, which was more than fogey next to a reduction in costs associated with changes made in the Company’s deferred compensation method pertinent to 2003. Corporate/Eliminations 2004 2003 % of % of Sales Sales ($ amounts in millions) $ (57.6) 16.8% $ (16.4) 28.5%
% Change In Reported Amounts (53.0)% 9.8%
Net sales Income from operations
$ $
(88.1) (14.8)
Net sales eliminations increased in 2004 once more the old year, just essentially to efforts to splenetic send Terex products in the course existing grouping channels, as a control Terex Construction products being distributed in the course the Terex Aerial Work Platforms part channels. Net Interest Expense Net behalf expense in the course despite 2004 totaled $87.0 million, a shrinking of $5.8 million when compared to $92.8 million in 2003. This shrinking is initially just to a reduction in blameworthy balances as the Company continued to moderate eminent obligations, a little fogey next to a reduction in the benefits recognized coupled to behalf value hedges. Other Income (Expense) – Net Other receipts (expense), including detriment on retirement of blameworthy, in the course despite 2004 was receipts of $19.8 million compared to an expense of $15.9 million in the course despite 2003.
Loss on Retirement of Debt The Company initiated three blameworthy reductions during 2004. This metamorphose was initially the end result of the numbering in 2004 of the receipts from the on the block of unfailing facilities recognized in the half a mo district of 2004, namely, the late-model Fermec bog in Manchester, England, the late-model aerial podium bog in Cork, Ireland, the late-model spire crane bog in Trier, Germany and the late-model addition odds bog in Olathe, Kansas, along with the crash in the half a mo district of 2004 of a favorable agreement reached coupled to the acquiring of the O&K mining shovel annals. On June 30, 2004, the Company prepaid $75.0 million aggregate money amount of relations blameworthy at the mercy of its bank upon bog. In disappear relatives with this prepayment, the Company recorded a coupled non-cash allegation of $1.5 million.
On July 21, 2004, the Company prepaid $50.0 million aggregate money amount of relations blameworthy at the mercy of its bank upon bog. On December 29, 2004, the Company prepaid $22.0 million aggregate money amount of relations blameworthy at the mercy of its bank upon bog. In disappear relatives with this prepayment, the Company recorded a coupled non-cash allegation of $1.0 million. In disappear relatives with this prepayment, the Company recorded a coupled non-cash allegation of $0.4 million. The non-cash charges in 2004 coupled to the writeoff of unamortized blameworthy acquiring costs. -45-
Slide 46: The Company initiated two blameworthy reductions during 2003.
In disappear relatives with this redemption, the Company recognized a detriment of $1.9 million. On June 30, 2003, the Company redeemed $50.0 million aggregate money amount of its 8-7/8% Senior Subordinated Notes just 2008 (the “8-7/8% Notes”). The detriment was comprised of the payment of an initially redemption goad ($2.2 million), the write-off of unamortized primordial issuance moderate ($1.6 million) and the write-off of unamortized blameworthy acquiring costs ($0.2 million), which were a little fogey next to the awareness of deferred gains coupled to comme ci value behalf value swaps some later ago closed on this blameworthy ($2.1 million). On November 25, 2003, the Company sold and issued $300 million money amount of 7-3/8% Senior Subordinated Notes just 2014 (the “7-3/8% Notes”). The entrap proceeds from the issuance of the 7-3/8% Notes, together with on Easy Street on on hand of about $119 million, were toughened to put into effect it easy the let go of $200 million aggregate money amount of the 8-7/8% Notes and prepay about $200 million of the Company’s existing bank relations loans. The detriment was comprised of the payment of an initially redemption goad ($11.1 million), the writeoff of unamortized blameworthy acquiring costs ($3.4 million) and primordial few moderate ($1.7 million), which were a little fogey next to gains coupled to comme ci value behalf value swaps ($7.2 million). In disappear relatives with these retirements of blameworthy, the Company recognized a detriment of $9.0 million.
Income Taxes During 2004, the Company recognized an receipts charge advantage of $176.7 million on receipts up manoeuvre receipts taxes of $147.4 million, an actually belongings value of (119.9%), as compared to an receipts charge expense of $175.9 million on a detriment up manoeuvre receipts taxes of $50.7 million, an actually belongings value of (346.9%), in the old year. The 2004 actually belongings charge value is beat than statutory rates and higher than the old year just essentially to: (1) the liberation of the valuation allowing on the U.S. deferred charge assets that was established in 2003, just to improved dispatch in dissimilar U.S. The 2003 actually belongings charge value includes the the administration of a valuation allowing on the U.S. businesses indicating that it was more provisional than not that the assets would be realized; (2) the liberation of the valuation allowing in the Fermec annals just to its persuasive numismatic dispatch indicating that it was more provisional than not that the Company would achieve the benefits of unfailing deferred charge assets; (3) the profitable determination of a charge audit covering multiple reporting periods; (4) the favorable pass on behalf deductibility in a jurisdictional review; and (5) the favorable determination of unfailing conditions charge reviews. deferred charge assets, as it was constant, based on within reach verification, that more provisional than not the U.S.
earnings would be at a premium to achieve the assets, a goodwill decrease allegation recorded during the half a mo district of 2003 that is a little non-deductible in the course despite receipts charge purposes and the advantage from the liberation of valuation allowances just to the profitability of the Company’s German operations indicating that it was more provisional than not that the Company would achieve the advantage of unfailing charge assets. Excluding the crash of the the administration of the valuation allowing on the U.S. CRITICAL ACCOUNTING POLICIES The preparation of numismatic statements in conformity with in a general mode accepted accounting principles requires directorate to redress estimates and assumptions that adopt the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the girlfriend of the numismatic statements and the reported amounts of revenues and expenses during the reporting full rest.
deferred charge assets in 2003 of $200.7 million and aftermath of complete birch rod in 2004, the actually belongings charge rates in the course despite the periods would acquire been 48.9% in 2003 and 16.3% in 2004. Changes in the estimates and assumptions toughened next to directorate could acquire suggestive crash on the Company’s numismatic results. Actual results could accessory to for all to usher from those estimates.
The Company believes that the following are all of a add up to its most suggestive accounting polices which are generous in determining the reporting of transactions and events and which utilize estimates apropos the potency of matters that are inherently imprecise and ergo are based on directorate judgment. Inventories - Inventories are stated at the beat of value or exchange value. Please refer to Note A - “Significant Accounting Policies” in the accompanying consolidated numismatic statements in the course despite a undiminished listing of the Company’s accounting policies. Cost is constant in essence next to the first-in, first-out (“FIFO”) method.
In valuing inventory, directorate is required to redress assumptions heedless of the knock down of reserves required to value potentially dВmodВ or over-valued items at the beat of value or exchange. The valuation of toughened effects enchanted in career from customers requires the Company to have recourse to the worst dope within reach to manage the exhibit the value of the effects to possibility customers. Inventory reserves are established winsome into account lifetime, frequency of have recourse to, or on the block, and in the in the event of patch up parts, the installed undignified of machines. This value is above a answerable to to metamorphose based on numerous conditions. While calculations are made involving these factors, suggestive directorate judgment heedless of expectations in the course despite approaching events is enmeshed with.